It is probably safe to assume that most people are familiar with McDonald’s, the largest hamburger chain in the world. The hamburger chain was considering a real estate investment because of its potential tax advantages but it ceased to pursue spinning off its real estate assets.
In an investor’s meeting, Chief Administrative Officer Pete Bensen said that any possible value that will be created with real estate investment trust (REIT) is outweighed by significant financial and operational risks. Instead, McDonald’s is now planning to refranchise 4,000 restaurants instead of its previous target of 3,500 restaurants. This will put McDonald’s in a position to meet its new long term goal to be 95% franchised.
A number of changes are being made by McDonald’s in the US to set the stage for a turnaround. Tweaks have been made to food preparation like toasting buns longer and searing burgers to make them juicier. The company is also switching back to butter and regular English muffins instead of whole grain and muffins and margarine on its Egg McMcffins.
The company is also making efforts to simplify its menu, speed up service and improve order accuracy to increase its profits. An example is the new buttermilk chicken sandwich which is being positioned as a premium offering to boost consumer perception about food quality.
Looking ahead, McDonald’s is expecting increased sales at established locations worldwide for the final months of the year. In the third quarter, sales at established US locations have edged higher to end the streak of 2-year quarterly declines. McDonald’s is expecting sales growth from 3% to 5% next year with capital expenditures of about $2 billion.
In Europe, McDonald’s has announced that its packaging is now sustainably sourced. Packaging items like cartons, cups, bags, napkins and tray liners are made from 170,000 tonnes of wood fiber from recycled sources in the forests. This step represents a key milestone in McDonald’s Europe sustainable packaging strategy.
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