Understanding McDonald's: Comprehensive company primer and profitability analysis (Part 12 of 21)
Consolidated selling, general, and administrative (SG&A) expenses increased 3% (4% in constant currencies) in 2012 and increased 3% (flat in constant currencies) in 2011. The growth rate for 2012 was primarily due to higher employee costs, the 2012 London Olympics sponsorship, higher technology-related costs, and the 2012 Worldwide Owner/Operator Convention—partly offset by lower incentive-based compensation.
The growth rate for 2011 was flat, as higher employee and other costs were offset by lower incentive-based compensation and costs in 2010 related to the Vancouver Olympics and the company’s 2010 Worldwide Owner/Operator Convention.
Selling, general, and administrative expenses as a percent of revenues were 8.9% in 2012 and 2011, and 9.7% in 2010. Selling, general, and administrative expenses as a percent of system-wide sales were 2.8% in 2012 and 2011, and 3.0% in 2010. Management believes that analyzing selling, general, and administrative expenses as a percent of system-wide sales as well as revenues is meaningful because these costs are incurred in order to support the overall McDonald’s business.
Browse this series on Market Realist:
- Part 1 - McDonald’s global business model, the “three-legged stool”
- Part 2 - What is a franchise and how do McDonald’s franchise agreements work?
- Part 3 - How important are franchise revenues to McDonald’s?