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Products: McDonald's Corporation (MCD)

U.S.(U.S.)
International Lead Markets(International Lead Markets)
High Growth Markets(High Growth Markets)
Foundation Markets and Corporate(Foundation Markets and Corporate)

U.S.

What is being offered?

McDonald's owns and franchises its restaurants all over the world. Of the 37,241 restaurants in 120 countries at the end of December 31, 2017, 34,173 were operated by franchisees and 3,068 were operated by the company.

McDonald's essentially offers a uniform menu, though with minor variations to suit local tastes. A typical McDonald's menu includes burgers (Big Mac, McDouble, Greek Mac), sandwiches, salads, combos such as the happy meal, french fries, breakfast sandwiches (McMuffins), beverages (soft drinks, coffee, milk shakes, juices), and desserts (ice cream, pies, smoothies).

Company-operated restaurants are low margin businesses (~20% operating margin) as compared to franchise restaurants (~ 80% operating margin). This is largely owing to the extra costs involved with company operated restaurants such as employees and operational costs which are not associated with franchises. With franchises, the primary costs involved are the occupancy costs. This is a primary reason why McDonald's and other chains prefer the franchise model despite lower revenues (Franchises pay only a small portion of sales as royalty).

However, company operated restaurants are important for various reasons. Company-operated restaurants are used by the company to develop and refine operating standards, marketing concepts, and product and pricing strategies, so that only the best are introduced system wide. Owning restaurants also lends credibility to being a franchiser and helps provide employees with restaurant operations experience. Additionally, the company-operated business also helps to facilitate strategic changes in restaurant ownership.

U.S. is the largest segment for the company. It operates more than 14,000 restaurants in the U.S. of which nearly 12,500 are franchised and around 1,500 are company owned.

Who are its clients?

Consumers all over the world, especially people belonging to the age group of 10-45 years who like fast food.

Who are its competitors?

McDonald's competes primarily with Wendy's and Burger King in the hamburger fast food category. However, in the overall fast food industry, McDonald's is the market leader with 22% market share followed by Yum! Brands and Subway.

With the launch of its specialty coffee brand McCafe, McDonald's now also competes directly with the coffee chains such as Starbucks.

What do the buyers care about?

  1. Taste
  2. Price
  3. Variety in the menu
  4. Hygiene
  5. Health factor (Consumers have filed cases against McDonald's for obesity in the past - although all types of fast food have the same non-nutritional factors)
  6. Geographic presence (McDonald's is miles ahead of its competitors in its presence globally)
  7. Customer service
  8. Tasteful marketing campaigns

Number of Company Operated Restaurants (US)

Company Operated Restaurants are restaurants owned completely by McDonald's, and the company is responsible for all its activities. All sales recorded at these restaurants are reported as revenues for the company.

As McDonald's moves toward its goal of a 95% franchised entity, the number of company operated restaurants are declining.

Chart: Number of Company Operated Restaurants (US)

Average Revenue per Company Operated Restaurant (US)

Average revenue per company operated restaurant is determined by the average number of customers visiting these restaurants per day and the average customer spend per visit.

ince 2014, average revenue per company-operated restaurant has increased steadily as McDonald's focuses on its turnaround program. With rising comparable sales as both guest count and average ticket price increase, we expect a steady increase in this metric over our forecast period In 2016 and 2017, average revenue per company-owned restaurant in the U.S. increased by more than 12% and 17% respectively.

Chart: Average Revenue per Company Operated Restaurant (US)

Number of Franchisees Restaurants (US)

McDonald's earns royalties and rents from its franchisees which is reported as revenues from franchised restaurants. Margins of franchised restaurants are much higher compared to company owned restaurants making them more profitable. McDonald's is working towards a goal of becoming a 95% franchised entity and this goal is likely to be achieved by 2018. As the company looks to achieve this target the number of franchised restaurants are growing at a fast pace.

Chart: Number of Franchisees Restaurants (US)

Average Revenue Per Franchised Restaurant (US)

McDonald's received a standard percentage as royalty from the franchised restaurants based on their sales number. Average revenue per franchised restaurant is determined by restaurant sales ( which is calculated based on the average number of customers visiting these restaurants per day and the average customer spend per visit) and the royalty percentage.

he Average Revenue Per Franchised Restaurant has increased from $0.31 million in 2010 to $0.36 million in 2017, save for a decline in 2014. This was primarily due to increasing traffic from the breakfast segment and McCafe segment, and price increases.

Chart: Average Revenue Per Franchised Restaurant (US)

International Lead Markets

What is being offered?

McDonald's owns and franchises its restaurants all over the world. Of the 37,241 restaurants in 120 countries at the end of December 31, 2017, 34,173 were operated by franchisees and 3,068 were operated by the company

McDonald's essentially offers a uniform menu, though with minor variations to suit local tastes. A typical McDonald's menu includes burgers (Big Mac, McDouble, Greek Mac), sandwiches, salads, combos such as the happy meal, french fries, breakfast sandwiches (McMuffins), beverages (soft drinks, coffee, milk shakes, juices), and desserts (ice cream, pies, smoothies).

Company-operated restaurants are low margin businesses (~20% operating margin) as compared to franchise restaurants (~ 80% operating margin). This is largely owing to the extra costs involved with company operated restaurants such as employees and operational costs which are not associated with franchises. With franchises, the primary costs involved are the occupancy costs. This is a primary reason why McDonald's and other chains prefer the franchise model despite lower revenues (Franchises pay only a small portion of sales as royalty).

However, company operated restaurants are important for various reasons. Company-operated restaurants are used by the company to develop and refine operating standards, marketing concepts, and product and pricing strategies, so that only the best are introduced system wide. Owning restaurants also lends credibility to being a franchiser and helps provide employees with restaurant operations experience. Additionally, the company-operated business also helps to facilitate strategic changes in restaurant ownership.

International Lead Markets : This segment consists of established markets including Australia, Canada, France, Germany, the U.K. and related markets. McDonald's operates nearly 7,000 restaurants in these markets, of which around 1,000 restaurants are company owned.

Who are its clients?

Consumers all over the world, especially in the age group of 10-45 years, who like fast food.

Who are its competitors?

McDonald's competes primarily with Wendy's and Burger King in the hamburger fast food category. However, in the overall fast food industry, McDonald's is the market leader with 22% market share followed by Yum! Brands and Subway.

With the launch of its specialty coffee brand McCafe, McDonald's now also competes directly with the coffee chains, such as Starbucks.

What do buyers care about?

  1. Taste
  2. Price
  3. Variety in the menu
  4. Hygiene
  5. Health factor (consumers have filed cases against McDonald's for obesity in the past - although all fast food chains have the same non-nutritional factors)
  6. Geographical presence (McDonald's is miles ahead of its competitors in its presence globally)
  7. Customer service
  8. Tasteful marketing campaigns

Number of Company Operated Restaurants (Inter)

Company Operated Restaurants are restaurants owned completely by McDonald's, and the company is responsible for all its activities. All sales recorded at these restaurants are reported as revenues for the company.

As McDonald's moves toward its goal of a 95% franchised entity, the number of company-operated restaurants is declining.

Chart: Number of Company Operated Restaurants (Inter)

Average Revenue per Company Operated Restaurant (Inter)

Average revenue per company operated restaurant is determined by the average number of customers visiting these restaurants per day and the average customer spend per visit.

The average revenue per company-operated restaurant fell from $4.07 million in 2014 to $3.90 million in 2016. It increased dramatically in 2017 to $4.53 million as a result of rising comparable sales as both guest count and average ticket price increase.

Chart: Average Revenue per Company Operated Restaurant (Inter)

Number of Franchisees Restaurants (Inter)

McDonald's earns royalties and rents from its franchisees which is reported as revenues from franchised restaurants. Margins of franchised restaurants are much higher compared to company owned restaurants making them more profitable. McDonald's is working towards a goal of becoming a 95% franchised entity and this goal is likely to be achieved by 2018. As the company looks to achieve this target the number of franchised restaurants are growing at a fast pace.

Historical numbers are taken from the company's SEC filings. As McDonald's works towards its goal of becoming a 95% franchised entity.

Chart: Number of Franchisees Restaurants (Inter)

Average Revenue Per Franchised Restaurant (Inter)

McDonald's received a standard percentage as royalty from the franchised restaurants based on their sales number. Average revenue per franchised restaurant is determined by restaurant sales ( which is calculated based on the average number of customers visiting these restaurants per day and the average customer spend per visit) and the royalty percentage.

The Average Revenue Per Franchised Restaurant stayed relatively flat between 2011 and 2014. After a dip in 2015, the average revenue per franchised restaurant has been growing at a steady clip as a result of the introduction of premium fares, 'All Day Breakfast', and the rolling out of the 'Experience of the Future' restaurants.

Chart: Average Revenue Per Franchised Restaurant (Inter)

High Growth Markets

What is being offered?

McDonald's owns and franchises its restaurants all over the world. Of the 37,241 restaurants in 120 countries at the end of December 31, 2017, 34,173 were operated by franchisees and 3,068 were operated by the company.

McDonald's essentially offers a uniform menu, though with minor variations to suit local tastes. A typical McDonald's menu includes burgers (Big Mac, McDouble, Greek Mac), sandwiches, salads, combos such as the happy meal, french fries, breakfast sandwiches (McMuffins), beverages (soft drinks, coffee, milk shakes, juices), and desserts (ice cream, pies, smoothies).

Company-operated restaurants are low margin businesses (~20% operating margin) as compared to franchise restaurants (~ 80% operating margin). This is largely owing to the extra costs involved with company operated restaurants such as employees and operational costs which are not associated with franchises. With franchises, the primary costs involved are the occupancy costs. This is a primary reason why McDonald's and other chains prefer the franchise model despite lower revenues (Franchises pay only a small portion of sales as royalty).

However, company operated restaurants are important for various reasons. Company-operated restaurants are used by the company to develop and refine operating standards, marketing concepts, and product and pricing strategies, so that only the best are introduced system wide. Owning restaurants also lends credibility to being a franchiser and helps provide employees with restaurant operations experience. Additionally, the company-operated business also helps to facilitate strategic changes in restaurant ownership.High Growth Markets - markets that the Company believes haverelatively higher restaurant expansion and franchising potentialincluding China, Italy, Korea, the Netherlands, Poland, Russia, Spain,Switzerland and related markets. The company operates nearly 5,500 restaurants in these markets of which roughly 50% are company owned.

Who are its clients?

Consumers all over the world, especially in the age group of 10-45 years who like fast food.

Who are its competitors?

McDonald's competes primarily with Wendy's and Burger King in the hamburger fast food category. However, in the overall fast food industry, McDonald's is the market leader with 22% market share followed by Yum! Brands and Subway.

With the launch of its specialty coffee brand McCafe, McDonald's now also competes directly with the coffee chains such as Starbucks and Dunkin' Donuts.

What do buyers care about?

  1. Taste
  2. Price
  3. Variety in the menu
  4. Hygiene
  5. Health factor (consumers have filed cases against McDonald's for obesity in the past - although all fast food chains have the same non-nutritional factors)
  6. Geographical presence (McDonald's is miles ahead of its competitors in its presence globally)
  7. Customer service

Number of Company Operated Restaurants (HGM)

Company Operated Restaurants are restaurants owned completely by McDonald's, and the company is responsible for all its activities. All sales recorded at these restaurants are reported as revenues for the company.

As McDonald's move towards its goal of a 95% franchised entity the number of company operated restaurants are declining.

Chart: Number of Company Operated Restaurants (HGM)

Average Revenue per Company Operated Restaurant (HGM)

Average revenue per company operated restaurant is determined by the average number of customers visiting these restaurants per day and the average customer spend per visit.

After consistently falling from 2011 until 2016, from $2.32 million to $1.86 million, the metric underwent a significant jump in 2017 to $4.11 million. This was the result of strong comparable sales growth, along with a decline in company-operated stores.

Chart: Average Revenue per Company Operated Restaurant (HGM)

Number of Franchisees Restaurants (HGM)

McDonald's earns royalties and rents from its franchisees which is reported as revenues from franchised restaurants. Margins of franchised restaurants are much higher compared to company owned restaurants making them more profitable. McDonald's is working towards a goal of becoming a 95% franchised entity and this goal is likely to be achieved by 2018. As the company looks to achieve this target the number of franchised restaurants are growing at a fast pace.

Historical numbers are taken from the company's SEC filings. As McDonald's works towards its goal of becoming a 95% franchised entity.

Chart: Number of Franchisees Restaurants (HGM)

Average Revenue Per Franchised Restaurant (HGM)

McDonald's received a standard percentage as royalty from the franchised restaurants based on their sales number. Average revenue per franchised restaurant is determined by restaurant sales ( which is calculated based on the average number of customers visiting these restaurants per day and the average customer spend per visit) and the royalty percentage.

The Average Revenue Per Franchised Restaurant has been declining since 2011. The metric has fallen from $0.466 million in 2011 to $0.198 million in 2017. This has largely been a result of the considerable increase in the number of franchised restaurants, as well as an increase in the sales of value meals.

Chart: Average Revenue Per Franchised Restaurant (HGM)

Foundation Markets and Corporate

What is being offered?

McDonald's owns and franchises its restaurants all over the world. Of the 37,241 restaurants in 120 countries at the end of December 31, 2017, 34,173 were operated by franchisees and 3,068 were operated by the company.

McDonald’s essentially offers a uniform menu, though with minor variations to suit local tastes. A typical McDonald’s menu includes burgers (Big Mac, McDouble, Greek Mac), sandwiches, salads, combos such as the happy meal, french fries, breakfast sandwiches (McMuffins), beverages (soft drinks, coffee, milk shakes, juices), and desserts (ice cream, pies, smoothies).

Company-operated restaurants are low margin businesses (~20% operating margin) as compared to franchise restaurants (~ 80% operating margin). This is largely owing to the extra costs involved with company operated restaurants such as employees and operational costs which are not associated with franchises. With franchises, the primary costs involved are the occupancy costs. This is a primary reason why McDonald's and other chains prefer the franchise model despite lower revenues (Franchises pay only a small portion of sales as royalty).

However, company operated restaurants are important for various reasons. Company-operated restaurants are used by the company to develop and refine operating standards, marketing concepts, and product and pricing strategies, so that only the best are introduced system wide. Owning restaurants also lends credibility to being a franchiser and helps provide employees with restaurant operations experience. Additionally, the company-operated business also helps to facilitate strategic changes in restaurant ownership.

The segment Foundational Markets and Corporate consists of markets which the Company believes have thepotential to operate under a largely franchised model. Corporateactivities are also reported within this segment. Under this segment the company operates around 10,000 restaurants most of which are franchised.

Who are its clients?

Consumers all over the world, especially people belonging to the age group of 10-45 years who like fast food.

Who are its competitors?

McDonald's competes primarily with Wendy's and Burger King in the hamburger fast food category. However, in the overall fast food industry, McDonald's is the market leader with 22% market share followed by Yum! Brands and Subway.

With the launch of its specialty coffee brand McCafe, McDonald's now also competes directly with the coffee chains such as Starbucks.

What do the buyers care about?

TastePriceVariety in the menuHygieneHealth factor (Consumers have filed cases against McDonald's for obesity in the past - although all types of fast food have the same non-nutritional factors)Geographic presence (McDonald's is miles ahead of its competitors in its presence globally)Customer serviceTasteful marketing campaigns