How important are company operated store revenues to McDonald’s?

Market Realist

Understanding McDonald's: Comprehensive company primer and profitability analysis (Part 4 of 21)

(Continued from Part 3)

Company-operated store revenues account for approximately 18.2% of McDonald’s overall sales. These sales have been declining both on a global and a domestic basis as a percentage of total sales, which is positive for the Company’s profitability. The percentage of owned stores has fallen the most aggressively in Europe, where owned stores have fallen from 17.3% of revenue in 2011 to 15.9% of revenue in 2012.

In the U.S., the Company-operated margin percent decreased in 2012 primarily due to higher commodity and labor costs, partly offset by positive comparable sales. The margin percent decreased in 2011 due to higher commodity and occupancy costs, partly offset by positive comparable sales.

Europe’s Company-operated margin percent decreased in 2012 primarily due to higher labor and commodity costs across several markets, despite positive comparable sales in Russia and the U.K. The margin percent decreased in 2011 as higher commodity, labor, and occupancy costs were partly offset by positive comparable sales.

In APMEA, the Company-operated margin percent in 2012 decreased primarily due to higher labor and occupancy costs, partly offset by positive comparable sales. The margin percent decreased in 2011 as higher commodity, labor and occupancy costs were partly offset by positive comparable sales. Acceleration of new restaurant openings in China negatively impacted the margin percent in both periods. Similar to other markets, new restaurants in China initially open with lower margins that grow significantly over time.

 

Below you can see a more detailed breakdown of franchised vs. owned store margins:

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