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Category: Mcdonalds (MCD)
Date: 20 June 2020 Stock price of Mcdonald's: $186.56 Mcdonald's announces massive hiring spree post Covid-19 as states start opening up again following lockdowns and stay at home orders starts being lifted.
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The Company franchises and operates McDonald’s restaurants, which serve a locally-relevant menu of quality food and beverages in 119 countries. Of the 38,695 restaurants at year-end 2019, 36,059 were franchised, which is 93% "
More About Mcdonald's (MCD)
The Company franchises and operates McDonald’s restaurants, which serve a locally-relevant menu of quality food and beverages in 119 countries. Of the 38,695 restaurants at year-end 2019, 36,059 were franchised, which is 93% of McDonald's restaurants. McDonald’s franchised restaurants are owned and operated under one of the following structures - conventional franchise, developmental license or affiliate.
The optimal ownership structure for an individual restaurant, trading area or market (country) is based on a variety of factors, including the availability of individuals with the entrepreneurial experience and financial resources, as well as the local legal and regulatory environment in critical areas such as property ownership and franchising. The business relationship between McDonald’s and its independent franchisees is supported by adhering to standards and policies and is of fundamental importance to overall performance and to protecting the McDonald’s brand. The Company is primarily a franchisor and believes franchising is paramount to delivering great-tasting food, locally relevant customer experiences and driving profitability. Franchising enables an individual to be their own employer and maintain control over all employment related matters, marketing and pricing decisions, while also benefiting from the strength of McDonald’s global brand, operating system and financial resources. Directly operating McDonald’s restaurants contributes significantly to our ability to act as a credible franchisor. One of the strengths of the franchising model is that the expertise from operating Company-owned restaurants allows McDonald’s to improve the operations and success of all restaurants while innovations from franchisees can be tested and, when viable, efficiently implemented across relevant restaurants. Having Company-owned and operated restaurants provides Company personnel with a venue for restaurant operations training experience. In addition, in our Company-owned and operated restaurants, and in collaboration with franchisees, we are able to further develop and refine operating standards, marketing concepts and product and pricing strategies that will ultimately benefit McDonald’s restaurants.
The Company’s revenues consist of sales by Company-operated restaurants and fees from restaurants operated by franchisees. Fees vary by type of site, amount of Company investment, if any, and local business conditions. These fees, along with occupancy and operating rights, are stipulated in franchise/license agreements that generally have 20-year terms. Conventional Franchise Under a conventional franchise arrangement, the Company generally owns or secures a long-term lease on the land and building for the restaurant location and the franchisee pays for equipment, signs, seating and décor.
The Company believes that ownership of real estate, combined with the co-investment by franchisees, enables us to achieve restaurant performance levels that are among the highest in the industry. Franchisees are also responsible for reinvesting capital in their businesses over time. In addition, to accelerate implementation of certain initiatives, the Company may co-invest with franchisees to fund improvements to their restaurants or their operating systems. These investments, developed in collaboration with franchisees, are designed to cater to consumer preferences, improve local business performance, and increase the value of our brand through the development of modernized, more attractive and higher revenue generating restaurants. McDonald's Corporation 2019 Annual Report 4 The Company requires franchisees to meet rigorous standards and generally does not work with passive investors. The business relationship with franchisees is designed to facilitate consistency and high quality at all McDonald’s restaurants. Conventional franchisees contribute to the Company’s revenue, primarily through the payment of rent and royalties based upon a percent of sales, with specified minimum rent payments, along with initial fees paid upon the opening of a new restaurant or grant of a new franchise. This structure enables McDonald’s to generate significant and predictable levels of cash flow. Developmental License or Affiliate Under a developmental license or affiliate arrangement, licensees are responsible for operating and managing the business, providing capital (including the real estate interest) and developing and opening new restaurants.
The Company generally does not invest any capital under a developmental license or affiliate arrangement, and it receives a royalty based on a percent of sales, and generally receives initial fees upon the opening of a new restaurant or grant of a new license. While developmental license and affiliate arrangements are largely the same, affiliate arrangements are used in a limited number of foreign markets (primarily China and Japan) where the Company also has an equity investment and records its share of net results in Equity in earnings of unconsolidated affiliates
The optimal ownership structure for an individual restaurant, trading area or market (country) is based on a variety of factors, including the availability of individuals with the entrepreneurial experience and financial resources, as well as the local legal and regulatory environment in critical areas such as property ownership and franchising. The business relationship between McDonald’s and its independent franchisees is supported by adhering to standards and policies and is of fundamental importance to overall performance and to protecting the McDonald’s brand. The Company is primarily a franchisor and believes franchising is paramount to delivering great-tasting food, locally relevant customer experiences and driving profitability. Franchising enables an individual to be their own employer and maintain control over all employment related matters, marketing and pricing decisions, while also benefiting from the strength of McDonald’s global brand, operating system and financial resources. Directly operating McDonald’s restaurants contributes significantly to our ability to act as a credible franchisor. One of the strengths of the franchising model is that the expertise from operating Company-owned restaurants allows McDonald’s to improve the operations and success of all restaurants while innovations from franchisees can be tested and, when viable, efficiently implemented across relevant restaurants. Having Company-owned and operated restaurants provides Company personnel with a venue for restaurant operations training experience. In addition, in our Company-owned and operated restaurants, and in collaboration with franchisees, we are able to further develop and refine operating standards, marketing concepts and product and pricing strategies that will ultimately benefit McDonald’s restaurants.
The Company’s revenues consist of sales by Company-operated restaurants and fees from restaurants operated by franchisees. Fees vary by type of site, amount of Company investment, if any, and local business conditions. These fees, along with occupancy and operating rights, are stipulated in franchise/license agreements that generally have 20-year terms. Conventional Franchise Under a conventional franchise arrangement, the Company generally owns or secures a long-term lease on the land and building for the restaurant location and the franchisee pays for equipment, signs, seating and décor.
The Company believes that ownership of real estate, combined with the co-investment by franchisees, enables us to achieve restaurant performance levels that are among the highest in the industry. Franchisees are also responsible for reinvesting capital in their businesses over time. In addition, to accelerate implementation of certain initiatives, the Company may co-invest with franchisees to fund improvements to their restaurants or their operating systems. These investments, developed in collaboration with franchisees, are designed to cater to consumer preferences, improve local business performance, and increase the value of our brand through the development of modernized, more attractive and higher revenue generating restaurants. McDonald's Corporation 2019 Annual Report 4 The Company requires franchisees to meet rigorous standards and generally does not work with passive investors. The business relationship with franchisees is designed to facilitate consistency and high quality at all McDonald’s restaurants. Conventional franchisees contribute to the Company’s revenue, primarily through the payment of rent and royalties based upon a percent of sales, with specified minimum rent payments, along with initial fees paid upon the opening of a new restaurant or grant of a new franchise. This structure enables McDonald’s to generate significant and predictable levels of cash flow. Developmental License or Affiliate Under a developmental license or affiliate arrangement, licensees are responsible for operating and managing the business, providing capital (including the real estate interest) and developing and opening new restaurants.
The Company generally does not invest any capital under a developmental license or affiliate arrangement, and it receives a royalty based on a percent of sales, and generally receives initial fees upon the opening of a new restaurant or grant of a new license. While developmental license and affiliate arrangements are largely the same, affiliate arrangements are used in a limited number of foreign markets (primarily China and Japan) where the Company also has an equity investment and records its share of net results in Equity in earnings of unconsolidated affiliates
Quick facts about Mcdonald's (MCD)
- Mcdonalds is listed on the New York Stock Exchange under share code ticker: MCD
- Market capital of Mcdonalds: $147.809 billion
- Number of Mcdonalds restaurants: 38 695
- Number of employees: 205 000
- Revenues in 2019: $21.07 billion
- Earnings per share in 2019: $7.88
- Dividends paid per share in 2019: $4.73
- Number of Mcdonalds shares in issue: 764.9 million
- Cash on balance sheet: $898.5 million
Press release announcing the hiring of Mcdonald's staff this summer
As states and communities continue to re-open their economies, McDonald’s restaurants are expecting to hire approximately 260,000 restaurant employees in the U.S. this summer. This comes as McDonald’s restaurants begin to welcome customers back into dining rooms with extra precautions in place. McDonald’s has implemented nearly 50 new safety procedures to protect crew and customers. These include wellness and temperature checks, social distancing floor stickers, protective barriers at order points, masks and gloves for employees with the addition of new procedures, and training for the opening of dining rooms.
“We are excited to welcome new employees to our McFamily, and we want candidates and their families to know we have one goal – to keep our people safe. We’ve put new minimum national standards and nearly 50 new processes in place in our restaurants as they continue to re-open safely and judiciously,” said Joe Erlinger, President of McDonald’s USA. “Our local business owners are proud to help their communities and provide employment and educational opportunities to hundreds of thousands of people this summer.”
Through a summer job at a McDonald’s restaurant, individuals not only learn work readiness skills on the job, such as teamwork, customer service and responsibility, they will also have the chance to further their education.
This year marks the five-year anniversary of Archways to Opportunity and so far McDonald’s has given out more than $100 million in tuition assistance and supported more than 55,000 restaurant workers and corporate employees. Eligible after just 90 days and 15 hours a week, restaurant employees can earn a high school diploma and receive $2,500 in upfront college tuition assistance. Restaurant employees can also access free education and career advising services and the opportunity to learn English as a second language. Archways to Opportunity has proven to promote opportunity and mobility for McDonald’s diverse employee community. More than 50 percent of the participants are individuals who identify as people of color and almost two-thirds of participants are women.
Twin sisters Jaelyn and Jocelyn Fluker are McDonald’s employees and seniors at Indiana State University who have utilized the Archways to Opportunity program for the past two years. “Working at McDonald’s and participating in Archways eased my family’s financial worries and set me up to graduate next year without major debt,” said Jaelyn Fluker. “I have gained not only financial assistance while working at McDonald’s but also valuable customer service experience, problem solving and communications skills, qualities I apply in college while also working as a tour guide to new students on campus”, said Jocelyn Fluker. Graduating next year with their bachelor's in criminal justice and psychology, the sisters are now looking at what’s next as they begin to explore grad schools and will leverage the Archways to Careers app to explore potential future careers and schooling.
“We are excited to welcome new employees to our McFamily, and we want candidates and their families to know we have one goal – to keep our people safe. We’ve put new minimum national standards and nearly 50 new processes in place in our restaurants as they continue to re-open safely and judiciously,” said Joe Erlinger, President of McDonald’s USA. “Our local business owners are proud to help their communities and provide employment and educational opportunities to hundreds of thousands of people this summer.”
Through a summer job at a McDonald’s restaurant, individuals not only learn work readiness skills on the job, such as teamwork, customer service and responsibility, they will also have the chance to further their education.
This year marks the five-year anniversary of Archways to Opportunity and so far McDonald’s has given out more than $100 million in tuition assistance and supported more than 55,000 restaurant workers and corporate employees. Eligible after just 90 days and 15 hours a week, restaurant employees can earn a high school diploma and receive $2,500 in upfront college tuition assistance. Restaurant employees can also access free education and career advising services and the opportunity to learn English as a second language. Archways to Opportunity has proven to promote opportunity and mobility for McDonald’s diverse employee community. More than 50 percent of the participants are individuals who identify as people of color and almost two-thirds of participants are women.
Twin sisters Jaelyn and Jocelyn Fluker are McDonald’s employees and seniors at Indiana State University who have utilized the Archways to Opportunity program for the past two years. “Working at McDonald’s and participating in Archways eased my family’s financial worries and set me up to graduate next year without major debt,” said Jaelyn Fluker. “I have gained not only financial assistance while working at McDonald’s but also valuable customer service experience, problem solving and communications skills, qualities I apply in college while also working as a tour guide to new students on campus”, said Jocelyn Fluker. Graduating next year with their bachelor's in criminal justice and psychology, the sisters are now looking at what’s next as they begin to explore grad schools and will leverage the Archways to Careers app to explore potential future careers and schooling.
Mcdonalds (MCD) stock price history
The image below shows the stock price history of Mcdonalds (MCD) over the last 3 years. And its been a very volatile time for MCD stock but the stock price has done ok over the the last 3 years with the stock increasing by 21.88% over the last 3 years.
Our latest stock valuation of Mcdonald's (30 April 2020)
So based on Mcdonald's latest earnings report, what is our target price for Mcdonalds? Based on Mcdonalds latest earnings release our valuation model provides a target (full value) price at $149.90 a share (down from our 3rd quarter 2019 Mcdonalds earnings report). We therefore believe the stock of Mcdonalds is overvalued
We therefore believe from a fundamental investing and value perspective the stock price of Mcdonald's is overvalued and we would not recommend buying into the stock at its current price, but rather at levels about 10% below our target price which is at $149.90 a stock. We therefore believe a good entry point into the stock of Mcdonalds is at $134.90 or below.
We expect the stock of Mcdonalds to pull back from its current levels to closer to our target price in coming weeks and months.
We therefore believe from a fundamental investing and value perspective the stock price of Mcdonald's is overvalued and we would not recommend buying into the stock at its current price, but rather at levels about 10% below our target price which is at $149.90 a stock. We therefore believe a good entry point into the stock of Mcdonalds is at $134.90 or below.
We expect the stock of Mcdonalds to pull back from its current levels to closer to our target price in coming weeks and months.