Jonathan Maze offers a primer on share repurchases in restaurant companies. Keep in mind that with many, if not most, chains, the franchisee controls the real estate. Those companies do not have the leverage to force the franchisee into constant remodeling.
Franchisors should put the brakes on share buybacks - RestBus
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This anonymous comment first appeared in April '25 but is a good addition to this topic: =====================================================
"One of the biggest challenges we face as McDonald’s owner/operators is that our average EBITDA is quickly eaten up by reinvestments. Between overpriced, McDonald’s-specific equipment, mandated dining remodels, and other CAPEX, there’s very little free cash flow left.
Meanwhile, G&A per restaurant keeps rising — with OTPs, PELs, facility maintenance, office staff, and more now essential just to keep up with system demands.
Contrast that with Chick-fil-A, where owner/operators don’t pay for capital expenditures. Most of their manager-partners, many with just two units, are likely earning more than 75% of McDonald’s franchisees — without the same risk or reinvestment burden.
And when it comes to long-term equity, McDonald’s continues to push for a system where you exit with as little as possible. It’s clear they prioritize supporting the next purchasing operator — as if it’s their capital to manage, not yours. The new 10-year cycle of mandated remodels and rebuilds just reinforces that."
When the company buys back shares, and then later declares a dividend to all outstanding shares, is the company paying a dividend to ITSELF???
When a company performs a share buyback (also known as a stock repurchase), it uses its cash to purchase its own shares from the open market or directly from shareholders. The fate of those repurchased shares depends on the company's strategy, but here's a breakdown of what typically happens:Primary Outcomes for Repurchased SharesRetirement (Cancellation):This is the most common practice, especially for large, mature companies.
The shares are permanently canceled and removed from circulation.
Effect: Reduces the total number of outstanding shares, which can increase earnings per share (EPS), boost the stock price, and enhance the ownership percentage for remaining shareholders.
Example: If a company has 1 billion shares outstanding and buys back 50 million, retiring them leaves 950 million shares.
Held as Treasury Stock:The shares are retained by the company in its "treasury" rather than being canceled immediately.
These treasury shares are still considered issued but are no longer outstanding—they don't receive dividends, have no voting rights, and aren't included in EPS calculations.
The company can later:Reissue them (e.g., for employee compensation, stock options, acquisitions, or to raise capital by selling them back to the market).
Retire them at a future date.
Effect: Temporarily reduces outstanding shares, providing flexibility for future use without diluting current shareholders if reissued carefully.
Written by Grok
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Share buybacks can also serve as a way to effectively manage capital allocation. For example, if the company is paying a 4% dividend. borrowing money at a 2% interest rate to buy back those shares saves the company money that it can reinvest in ints business. MCD should do buybacks like that, but we know what management does with the money, and it is not supporting the franchise owners' restaurants' unit level profitability
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