FI 560 Securities Analysis
McDonald’s has been in business since 1940, and now employs over 400,000 people worldwide. The company has restaurants all throughout North and South America, Europe, Australia and Asia, but are only thinly represented in the Middle East and Africa. The primary food products the company serves are hamburgers, cheeseburgers, chicken meals, french fries, coffee and milkshakes, but McDonald's is beginning to offer healthier products like wraps and salads. McDonald’s serves 64 million customers each day. McDonald’s sells its products in 117 countries and operates 32,737 restaurants as of the end of 2010. Of the restaurants, 80% are franchised or licensed, and the remaining 20% are operated by the company. Under their franchise arrangement, franchisees provide a portion of the capital required by initially investing in the equipment, signs, seating and décor of their restaurant businesses, and by reinvesting in the business over time. The Company owns the land and building or secures long-term leases for both Company-operated and conventional franchised restaurant sites. This maintains long-term occupancy rights, helps control related costs and assists in alignment with franchisees (MCD, 2010). The Company’s revenues consist of sales by Company operated restaurants and fees from restaurants operated by franchisees. Revenues from conventional franchised restaurants include rent and royalties based on a percent of sales along with minimum rent payments, and initial fees. Revenues from restaurants licensed to affiliates and developmental licensees include a royalty based on a percent of sales, and generally include initial fees.
Life Cycle Analysis
McDonald’s is a Classic-Growth company. The one issue most investors worry about with a Classic-Growth company is that it will peak and move into the declining stage. McDonald’s is currently doing reasonable not as high as more...