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Mcdonalds Corp. GREG BRUNO, LISANDRO TSAI, DREW OSIKA, MEILING LIU Presented: November 11, 2010. History of Holding. Bought 200 shares of MCD on March 3 rd , 2009 @ $52.44 As of November 10 th , 2010, MCD trades @ $79.50 for an unrealized gain of 51.6%

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Mcdonalds corp

Mcdonalds Corp.

GREG BRUNO, LISANDRO TSAI, DREW OSIKA, MEILING LIU

Presented: November 11, 2010


History of holding
History of Holding

  • Bought 200 shares of MCD on March 3rd, 2009 @ $52.44

  • As of November 10th, 2010, MCD trades @ $79.50 for an unrealized gain of 51.6%

  • Currently paying $2.44 annual dividend/share

    • 3% yield

  • $15,900 total value represents 4.8% of portfolio’s holdings


Company overview
Company Overview

  • Market leader in the global fast food industry

  • Offers core menu with some geographic variations

  • 32,478 restaurants in 117 countries (as of Dec. 31, 2009)

  • Serves 58 million customers daily and employs 385,000


Business model
Business Model

  • Franchise/Company-owned store mix

    • Franchise generates consistent rent and royalties at high margins

    • Company-owned generates full revenues but for lower margins with unpredictable costs

  • Supplies food and materials to restaurants through approved 3rd party operators


Strategy
Strategy

  • “Plan to win” (November 2004)

    • Renewed focus on people, products, place, price and promotion

    • 5-year NI growth of 75% (2005-09) vs. 14% (2000-05).1

  • Refranchise restaurants to stabilize cash flows and increase margins

  • Ongoing initiatives2

    • Service enhancement

    • Restaurant reimaging

    • Menu innovation

    • Grow aggressively in China

  • http://www.wikinvest.com/stock/McDonald%27s_%28MCD%29/Data/Net_Income_To_Common

  • McDonald’s Corporation 10-K Statement for FY2009, Page 12.



Main competitors
Main Competitors

  • Yum Brands, Inc. (YUM)

  • Wendy’s Arby’s Group Inc. (WEN)

  • Burger King Corporation

  • Doctor's Associates Inc. 

  • Starbucks Corporation


Industry overview
Industry Overview

  • Fast Food Restaurant Industry

  • Slow growth in the United States: 0.5% from 2005-2010 and 2.5% from 2010-2015

  • Consumers are choosing to buy lower-priced fast food items, cutting into revenue growth

  • Consumers are more health conscious

  • Domestic market saturation, oversees expansion

  • Low concentration

  • High competition


Industry overview1
Industry Overview

Market Share in the US by Revenue


Management assessment
Management Assessment

  • Exceeded or met targets for:

    • Long-term, constant currency financial targets of average annual Systemwide sales growth of 3% to 5%

    • Average annual operating income growth of 6% to 7%

    • Returned $16.6bn to shareholders under their $17 – $19bn target for 2007 through 2009

  • Management is placing much of their future growth in APMEA region

    Source: McDonald’s 2009 10-K, http://www.sec.gov/Archives/edgar/data/63908/000119312510042025/d10k.htm#toc84160_8


Issues of concern
Issues Of Concern

  • Rising food prices

    • Rising labor costs

  • Currency Wars

    • Earnings are affected by changes in particularly Euro, British Pound, Australian Dollar and Canadian Dollar.

    • Collectively these currencies represent approximately 70% of company’s operating income outside of US.

Source: McDonald’s 2009 10-K, http://www.sec.gov/Archives/edgar/data/63908/000119312510042025/d10k.htm#toc84160_8


Performance and financial measures
Performance and Financial Measures

Source: McDonald’s 2009 10-K, http://www.sec.gov/Archives/edgar/data/63908/000119312510042025/d10k.htm#toc84160_8


Performance and financial measures1
Performance and Financial Measures

Source: McDonald’s 2009 10-K, http://www.sec.gov/Archives/edgar/data/63908/000119312510042025/d10k.htm#toc84160_8




Discount rate
Discount Rate

  • Discount Rate at lower end of acceptable range

  • Low yield environment

  • McDonalds transitioning to a higher margin business model

  • McDonalds management committed to returning value to shareholders.





Recommendation
Recommendation

  • Hold our current position of 200 shares


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