McDonald's Case

COORDINATES:

TO: Jim Skinner (Vice Chairman and CEO)

FROM: JMSB Graduate (Intern)

DATE: 14/01/13

SUBJECT: McDonald’s

Main issue:

1-Company performance and value creation cannot be maintained if McDonald’s doesn’t adopt a more sustainable plan of action. McDonald’s should try to have a high ROIC even though the growth of the company decreases. More sustainable on the long-term. (Pressure from shareholders)

2-Loss of capital due to the foreign currency effect. Affects the efficiency and balance sheet of the business.

Recommendations:

1-Focus on the most profitable regions. Such as UK, France, USA, Germany, Australia, China, Japan, Canada… Restructure and invest more money on each McDonald’s restaurants/franchises for a higher profitability instead of blindly expanding and growing which gives a false feeling of security to shareholders and results in high growth stocks.

2-To avoid big losses of income due to the reporting of one currency to American dollars (main balance sheet of the company), McDonald’s could use financial tools such as future/forward rates and swaps as well. Another system is to use intermediaries’ houses between the different countries, which will exchange the different currencies at the most beneficial times for the company.

Analysis: Quantitative

Fact: Franchise increase in sales in 2010 is 8%, company-operated restaurants 5%

A privately managed joint has a better profitability on average. Franchises contribute the most in the good results of McDonald’s, and in the increase in EPS.

Fact:

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