May 22, 2008

More from Shareholder's Meeting

Forbes says:

"McDonald's can opt to absorb costs
rather than risk losing customers to
price hikes since its international
sales have been so strong lately".


This would indicate some cost shifting
back to MCD Corp so Opeators can offer
"value".

Forbes article is HERE

ChiTrib says Alvarez says:

"in today's environment, we can't pass on all our costs"

"The dollar menu is a key component and is not something
we will be moving off of"

ChiTrib article is HERE:

Please note that the above ChiTrib article mentions
our world famous Owner/Operator surveys!

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Newflash! - McDonald's will not pass all costs to consumers

It's shareholder meeting day so there will a
lot of silly headlines like this. Of course
we know McDonald's Corp does not set prices
for franchisees so this must mean just McOpCo.

Reuters story is HERE

The company said it remains committed to its low-price dollar menu:

"The menu (double cheeseburgers for $1) has
been popular with cash-strapped customers
and has helped drive traffic to stores,
which has helped to mitigate margin pressure
from commodity costs.
"

Oh, really ???

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May 20, 2008

Deutsche Bank Accepts Mediocrity

If you ever ask yourself, how can McDonald's push for a
national roll-out of McCafe when the sales of specialty
coffee have bee so unimpressive?

The answer is that Oak Brook thinks on a chain-wide scale
with little regard for the individual store. This is the same
logic Deutsche Bank uses to place a conservative "Hold"
rating on Starbucks.

Deutsche calculates, based on test markets, that McDonald's
could sell 30-40 units/day. That's enough to hurt sales at
Starbucks on a national basis.

So it's not about profitability for the individual store - it's
about the brand - and attracting investors away from other
brands to buy McDonald's shares.

Deutsche Bank article is HERE

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May 17, 2008

Five % Royalties?

McDonald's Owner/Operators in the USA will find some
interesting numbers in the McDonald's 10-Q published
May 6th. Ever wonder what your fees to McDonald's
would be if you owned the land and building and simply
paid Service Fees?

As you'll recall McDonald's sold its businesses in 18
Latin American and Caribbean countries. They sold about
1,600 restaurants.to a developmental licensee that now
owns the business, including the real estate. The buyers
pay monthly royalties commencing at a rate of 5% of
gross sales.

When comparing this to the fees you pay don't forget to
include your Service Fees which are essentially royalties
by a different name.

The first quarter MCD 10-Q is HERE

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May 12, 2008

SSS vs TCs




Our Owner/Operator surveys have
historically focused on Operator
comments and gathering some sales info.

To keep things simple we have not tracked transaction
counts. But, when studied TCs were usually a few
points behind the % increase. If the same store sales
increase was + 4% the TC increase was usually around
+ 2%. Expressed as percentages these are apples and
oranges but at least there was a trend for comparison.

This was obviously caused by menu price increases
and the resultant increase in average checks.

In what looks like a seismic shift TCs in many areas
have flip flopped and are increasing ahead of sales.

This can only mean more customers are moving to
the Dollar Menu.

So we are gathering Operator feedback on this topic
and will work to develop a simple way to include TCs
in future surveys.Please make a comment here or send
your thoughts to: adams@fegroup.com

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May 10, 2008

Article Grinds Up McCafe

Crain's Chicago Business is running a
comprehensive article about McCafe titled
"McD's coffee perks slowly"

Owner/Operator Irwin Kruger has the best
quote in the article when he says, "We need
to be convinced that the new product
line is going to give us the lift everyone
hopes it will".


The Crain's website is a subscriber site
so you may need to sign up for a free four
week trial.

Access the article HERE

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