Moving ahead
This year, McDonald’s Corporation (NYSE:MCD) is investing over $3 billion on upgrading its store interiors. $2 is targeted for new stores as the firm adds to its global footprint of 34,000 stores while Yum has managed to invest only $1 billion. The company said that the new interiors can increase sales by 6% to 7% in the year. New store openings, expanded hours, and menu improvements will help McDonald’s to achieve desired targets.
Burger King is also re-imaging its stores, and has completed 19% of the stores. This king is on the way to achieve a target of 40% re-imaged stores by the year 2015, and also formed a joint venture to increase the number of outlets to 1,000 in China. One of the reasons for Burger King’s slow growth in China is its late entry compared to Yum and McDonald’s.
With just 3% of operating income generated in China, McDonald’s has a different set of objectives than Yum. The company considers the country to be one of eight “major markets” that comprise over 70% of the company’s revenues. McDonald’s is also expanding its wings in South Korea and Malaysia, which, like China, should also see phenomenal growth.
McDonald’s highlights the power of a brand that customizes its offering to local tastes in individual countries. This is its key success for increasing income and sales in Europe. Despite the euro crisis and a troubled economy, 40% of total sales are from Europe.
McDonald’s has a strong competitive advantage over Burger King. It is easier for this hamburger giant to negotiate more favorable lease terms with landlords and developers, owing to its scale of operations. Unlike Burger King, McDonald’s is full of assets, from land to hamburgers that can be recognized by most people in the world.
To wrap things up
The fast food franchise has created a lot of value for its shareholders over the past decade. Since 2003, shares have roughly five-folded from $20 per share towards $100 at the moment, without suffering major setbacks. Simultaneous high growth, and Return on Invested Capital increases prove McDonald’s Corporation (NYSE:MCD) management team takes care of the real bottom line as well.
It is a great company overall with solid fundamentals and improving technicals. This company may be a good bargain moving forward with its worldwide brand recognition and presence.
McDonald’s is surely amongst the best breeds in the fast food industry, and it may be a worthwhile investment for the conservative investors. The company boasts a global operation coupled with an iconic brand image and a history of stellar business operations. I am therefore pretty bullish that this fast-food giant won’t let its valued investors down in the future.
The article This Fast-Food Giant May Yield Decent Returns to Investors originally appeared on Fool.com and is written by Abir Karmakar.
Abir Karmakar has no position in any stocks mentioned. The Motley Fool recommends McDonald’s. The Motley Fool owns shares of McDonald’s. Abir is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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