Anonymous said ... The current rebuild program is great!!! We just need to get it reversed 180 degrees. The operator should have a $650,000 cap, and the company should pay the balance! Lets face it, if the company thinks the operators currently have such a great deal, then lets reverse the terms, and they can have the great deal!!!
McDonald's Operators should check their copy of the
NLC headlines from the February 20 - 23, 2007 meeting..
There's a phrase used therein that should be expunged from the McDonald's vernacular.
Co-Investment - "Sharing Risks and Rewards"
I'm sure the Oak Brook boys love that phrase and a few politically correct Operators think it sounds clever - but it's vacuous and disingenuous.
There can be no sharing of "Risk" when MCD Corp. has nearly infinite assets and cash.
When an Operator runs the daily risk of being overleveraged and is personally responsible for millions in debt there can be
no "sharing" with a company with an enterprise value of
And corporate executives who use this term are completely insulated from any financial risk caused by their decisions.
The risk on the McDonald's Corporate side happens when an Operator gets upside down they have to go through the trouble of taking over the store(s), raising the rent and royalties, and reselling the store for a profit. That's not much of a risk - more of an upside.
And when an Operator leaves the system the more debt they have (and the less equity) the better is for MCD. All that debt will be paid off by the sale of the store(s), the net to the seller will be reduced, and the assets stay in the MCD system.
The only real risk to MCD is that all this remodeling and rebuilding of the MCD real estate portfolio might someday cause some hard questions to be asked about System Capital Corporation.
But a financial risk? ... That's 100% on the Owner/Operator side of the equation.