June 1, 2012

McDonald's Equity "Sweet Spot"


Most McDonald's Operators have seen a recent brochure advertising three stores 
for sale.

I've argued for years that there is much more to pricing McDonald's stores than cash
flow ratios.While not passing judgment on the asking price of these stores this package
does have a "Sweet Spot".

The "Sweet Spot" is the length of the remaining franchise terms (12 yrs, 10 yrs, 14 yrs).
These years give a buyer some time to justify required reinvestments triggered by the 
sale before having to worry about a rewrite.


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