David Palmer expands on his previous comments. The summary is on pages 3/4.
Note, he mentions "holding Operators more accountable to grading".
And EOTF "has already garnered a 90% buy-in from franchisees."
From turnaround to growth and free cash flow - RBC
I'm asked - why so much from David Palmer? Several reasons: * He's a smart fellow with whom I often disagree * He's been covering McDonald's for a long time and is eternally positive about the company. * Most analyst's reports are sent out as .pdf files which I can't really publish here. David's company does that but includes a link to the full report on their website. Other firms restrict such access to just their clients. In other words, everybody does it differently.
90% BUY IN ?????????????????????
I saw a lot of Buy In at the meeting by the O/O's. However, that is before they sit down and put pencil to paper on their business with these new costs.
Also we are some of the Biggest, Wealthest and most long term Operators. Once it gets down to the newest and smaller, less financially capable it will be a different story. I am thinking about 70% total will be favorable. However many of those will only be favorable due to the fact of being in so deep that they can not afford to get out.
I know of one situation that the operator just overspent by 25% in buying 10 Stores. He will have to rebuild 2 stores that was not included in the sale price and now he will have at least another 2.5 million in these new expenses. All Total he will spend 50% more than they are worth and they have little upside potential. Good Luck to Him!!!
If you see a lot of buy-in from the O/O's it just means that top management has done a good job of putting the right Operators in the right meetings.
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