Financial Analysis of the McDonalds Company

Financial Analysis of the McDonalds Company

(MCD) New York Stock Exchange

2111 McDonald's Dr.

Oak Brooke, IL 65023

1-800-244-6227

Chris Copley

PART 1, MCDONALDS OVERVIEW:

Brief Description:

McDonalds is the world's leading global foodservice retailer with 35,000 location serving approximately 70 million customers in more than 100 countries each day. (Mcdonalds.com). Local independent business men and women own and operate over 80% of the restaurants worldwide. McDonald's goal is to become customer's favorite place to eat and drink by serving core favorites such as world glass fries, big mac, Quarter Pounder and Chicken Nuggets (Mcdonalds.com).

Company History:

McDonalds Corporation was founded in 1955 when Ray Croc was appointed by the McDonald brothers as the first franchisee. Ray Croc opened his first restaurant in Des Plaines, Illinois. Ray croc recognized an opportunity to provide customers with a standard product that they could purchase at different locations. This simple idea led to a fast food chain that became the leading global food service retailer in the world. The organization has a trademarked golden arch that is recognized by nearly every American in the United States and has been the leading fast food chain in the world.

Organization:

McDonald's is organized as a divisional organization. It is operated by either a franchise, an affiliate or by the corporation itself. (Hunt) A divisional structure is a type of organization that groups together employees who are responsible for a particular product type or market service according to work flow this type of structure allows McDonald's to increase flexibility, and divides company responsibility into product, market and geographic structures. McDonald's restaurants are 80% franchised, of which 57% are conventional and 24% are licensed to foreign affiliates, and only 19% are company-operated.

Main Products:

The McDonalds Corporation sells many different types of fast food that can be purchased all over the world with the same presentation and taste (Mcdonalds.com). This concept is the foundation of this or any fast food franchise that wants success. McDonald's number one seller is the Big Mac which has been a trademark of the corporation for many years now. The company also sells others favorite's sandwiches such as the chicken and fish (Hunt). The company by far sells more combination meals then individual products. These combination choices allow customers to get a drink and fry at a discounted price. McDonald's all found a niche in the breakfast market by selling breakfast sandwiches and hash brown just to name a few. The company also sells dessert items such as apple pie and Milk shakes. McDonalds is constantly reviewing their menu to come up with new ways to meet the company's goals of bringing good food to customers.

Area of Operation:

McDonalds is a worldwide organization that operates in over 100 different countries with over 35,000 locations. The United States Corporation Headquarters is located in Oak Brooke, Illinois. The Company also has smaller headquarters that operate in international regions such as the Middle East & Africa, Latin America, Asia Pacific, and Europe (Mcdonalds.com). The McDonalds Corporation is continued to grow the amount of franchises where and when it is beneficial to the franchise but to the corporation as a whole.

Recent Developments

The organization just announced that work will start next year on an 86,000 square foot new distribution center in Orlando, Fl. The building will take more than a year to complete and will cost over 800,000 dollars (Miller). This distribution center will speed up logistics and allow for fast delivery time to southern locations. In addition the organization just announced that Hardcastle Restaurants, McDonald's franchisee for West and South India operations, will invest up to 850 bln Indian Rupees to add 250 outlets of the US fast food chain within 3-5 years-Business Standard. This move will strengthen the presence of the organization in that region (Miller). McDonalds continues to be thriving company in the United States of America and will be for the foreseen time to come.

Part 2, Financial Overview: Dollar in millions

a. Sales and Income Record

Sales and Income Record ..............................................Fiscal Years........................................

2008 2009 2010 2011 2012

Sales $16,561 $15,459 $16,233 $18,293 $18,603

Percentage change in sales each year -6.7% 5.0% 12.7% 1.7%

Net Income $4,313 $4,551 $4,946 $5,503 $5,465

Percentage change in net income each year 5.5% 8.7% 11.3% -0.7%

GRAPH OF SALES & NET INCOME, FY 2008-2012

Comments: Sales and net income have been steadily increasing over the last 5 years. In 2012 the numbers start to Plato which could be a sign of the change in world culture that focuses more on eating healthier. These numbers also reflect the difficult economic times experienced by America in 2008.

B. Expense Distribution: FY 2012

Major Expenses:

Company-operated restaurant expenses - $15,244

Franchise restaurants occupancy expense - 1,527

Selling, general and administrative expense - 2,455

Provision for income tax - 2,614

Major expenses include a company-operated expense which makes up 68% of the expense distribution. Franchise restaurant occupancy expense is second with 12% followed by selling, general and administrative expenses which is 11%. Franchise restaurants occupancy expense is 7% and interest expense makes up a mere 2%.

C. Asset Distribution: