McDonald's Corporation (MCD) Bundle
A Brief History of McDonald's Corporation
Company Overview
McDonald's Corporation, founded in 1940, has grown to become one of the largest and most recognizable fast-food chains globally. As of 2024, the company operates over 40,000 restaurants in more than 100 countries, primarily through a franchised model.
Recent Financial Performance
As of September 30, 2024, McDonald's reported a net income of $6,207 million, a decrease of 3% compared to $6,430 million in the same period of 2023. The diluted earnings per share (EPS) for the nine months was $8.59, down from $8.76 in the previous year.
| Financial Metrics | 2024 | 2023 | Change (%) |
|---|---|---|---|
| Net Income (in millions) | $6,207 | $6,430 | -3% |
| Earnings Per Share (diluted) | $8.59 | $8.76 | -2% |
| Revenue (in millions) | $19,532 | $19,088 | +2.3% |
| Dividends Paid (in millions) | $3,602 | $3,325 | +8.3% |
| Share Repurchases (in millions) | $2,321 | $2,203 | +5.4% |
Operational Insights
McDonald's operates with a heavily franchised business model, with approximately 95% of its restaurants being franchised. This structure generates stable and predictable revenue streams, largely dependent on franchisee sales.
Recent Developments
In 2024, McDonald's faced several challenges, including a negative impact from the ongoing war in the Middle East, which affected sales in the International Developmental Licensed Markets. The company also incurred net pre-tax charges of $142 million for the nine months, primarily related to transaction costs and non-cash impairment charges.
Cash Flow and Investments
For the nine months ended September 30, 2024, McDonald's reported cash provided by operations of $6.8 billion, exceeding capital expenditures by $4.8 billion. Cash used for investing activities totaled $4.6 billion, which included significant investments in its China business and the acquisition of McDonald's business in Israel.
| Cash Flow Metrics | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Cash Provided by Operations | $6,816 | $7,123 |
| Capital Expenditures | $1,968 | $1,600 |
| Cash Used for Investing Activities | $4,604 | $2,345 |
| Cash Used for Financing Activities | $5,617 | $3,788 |
Future Outlook
McDonald's anticipates that net restaurant unit expansion will contribute nearly 2% to 2024 Systemwide sales growth. The company expects capital expenditures to be between $2.5 and $2.7 billion, focusing on new restaurant openings.
A Who Owns McDonald's Corporation (MCD)
Shareholder Composition
As of September 30, 2024, McDonald's Corporation (MCD) had a total of 1.6606 billion shares issued. The shareholder equity was reported as follows:
| Equity Component | Amount (in millions) |
|---|---|
| Common Stock | $17 |
| Additional Paid-In Capital | $9,194 |
| Retained Earnings | $64,819 |
| Accumulated Other Comprehensive Income (Loss) | $(2,337) |
| Treasury Stock (at cost) | $(76,870) |
| Total Shareholders’ Equity (Deficit) | $(5,177) |
Ownership Structure
Approximately 95% of McDonald's restaurants worldwide were franchised as of September 30, 2024. The ownership structure is broken down as follows:
| Ownership Type | Number of Restaurants |
|---|---|
| Conventional Franchised | 21,864 |
| Developmental Licensed | 9,077 |
| Foreign Affiliated | 9,814 |
| Total Franchised | 40,755 |
| Company-Owned and Operated | 2,064 |
| Total Systemwide Restaurants | 42,819 |
Major Shareholders
Key institutional shareholders as of September 2024 included:
| Shareholder | Ownership (%) |
|---|---|
| The Vanguard Group, Inc. | 8.67% |
| BlackRock, Inc. | 7.54% |
| State Street Corporation | 4.91% |
| Wellington Management Group LLP | 3.77% |
| FMR LLC (Fidelity Investments) | 3.40% |
Financial Performance
For the nine months ended September 30, 2024, McDonald's reported:
- Net Income: $6,207 million
- Earnings Per Share (Diluted): $8.59
- Total Revenues: $19,532 million
Franchised revenues for the same period were:
| Segment | Revenue (in millions) |
|---|---|
| U.S. | $5,417 |
| International Operated Markets | $5,039 |
| International Developmental Licensed Markets & Corporate | $1,300 |
| Total Franchised Revenues | $11,756 |
Stock Performance
As of September 30, 2024, McDonald's stock (MCD) performance indicators were:
- Current Stock Price: $286.50
- Market Capitalization: $475 billion
- Dividend Yield: 2.4%
McDonald's has a history of consistent dividend payments, with the most recent quarterly dividend declared at $1.77 per share, effective December 16, 2024.
McDonald's Corporation (MCD) Mission Statement
Mission Statement Overview
The mission statement of McDonald's Corporation emphasizes its commitment to serving quality food and beverages in a friendly environment. The company aims to be a leader in the quick-service restaurant sector while focusing on customer satisfaction and community involvement.
Financial Performance and Strategic Goals
As of September 30, 2024, McDonald's reported the following key financial metrics:
| Metric | 2024 | 2023 | Change (%) |
|---|---|---|---|
| Net Income (in millions) | $6,207 | $6,430 | (3%) |
| Earnings per Share - Diluted | $8.59 | $8.76 | (2%) |
| Total Revenues (in millions) | $19,532 | $19,088 | 2% |
| Operating Income (in millions) | $8,844 | $8,845 | (0%) |
| Company-Owned Restaurant Sales (in millions) | $7,472 | $7,267 | 3% |
| Franchised Restaurant Revenues (in millions) | $11,756 | $11,568 | 2% |
Franchise Model and Global Presence
As of September 30, 2024, McDonald's operates a predominantly franchised model, with approximately 95% of its restaurants being franchised. This strategy enables the company to generate stable and predictable revenues while empowering franchisees to manage local operations effectively.
Key Business Segments
McDonald's operates through multiple segments, which include:
- U.S. Segment
- International Operated Markets
- International Developmental Licensed Markets & Corporate
| Segment | Revenues (in millions) | Operating Income (in millions) |
|---|---|---|
| U.S. | $7,997 | $4,400 |
| International Operated Markets | $9,443 | $4,459 |
| International Developmental Licensed Markets & Corporate | $2,092 | ($15) |
Market Challenges and Strategic Initiatives
In 2024, McDonald's faced several challenges, including inflationary pressures and geopolitical issues affecting certain markets. The company remains focused on its strategic initiatives, such as the "Accelerating the Organization" program, aimed at modernizing operations and enhancing efficiencies.
Recent Developments
McDonald's has continued to focus on digital innovations and customer engagement strategies. The company reported a 6% increase in its quarterly cash dividend to $1.77 per share, reflecting its commitment to returning value to shareholders.
Future Outlook
Looking ahead, McDonald's expects to open over 2,100 new restaurants globally in 2024, with a focus on expanding its footprint in key markets. The company aims for a free cash flow conversion rate in the 90% range and anticipates capital expenditures between $2.5 billion and $2.7 billion.
How McDonald's Corporation (MCD) Works
Business Model
McDonald's Corporation operates a heavily franchised business model, with approximately 95% of its restaurants globally being franchised as of September 30, 2024. This model generates stable and predictable revenues primarily from franchisee sales and resulting cash flow streams.
Financial Performance
For the quarter ended September 30, 2024, McDonald's reported total revenues of $6,873 million, marking a 3% increase compared to $6,692 million in the same quarter of 2023. The breakdown of revenues is as follows:
| Revenue Source | Q3 2024 (in millions) | Q3 2023 (in millions) | Change (%) |
|---|---|---|---|
| Company-owned and operated restaurants | $2,656 | $2,556 | 4% |
| Revenues from franchised restaurants | $4,094 | $4,047 | 1% |
| Other revenues | $124 | $89 | 39% |
| Total Revenues | $6,873 | $6,692 | 3% |
Net income for the quarter was $2,255 million, a decrease of 3% from $2,317 million in Q3 2023. Earnings per share (diluted) also decreased by 1% to $3.13 from $3.17.
Operating Costs and Expenses
In Q3 2024, total operating costs and expenses amounted to $3,685 million, an increase of 6% compared to $3,484 million in Q3 2023. The components of operating expenses are detailed below:
| Expense Type | Q3 2024 (in millions) | Q3 2023 (in millions) | Change (%) |
|---|---|---|---|
| Company-owned and operated restaurant expenses | $2,248 | $2,135 | 5% |
| Franchised restaurants-occupancy expenses | $646 | $625 | 3% |
| Other restaurant expenses | $104 | $68 | 53% |
| Selling, general & administrative expenses | $647 | $680 | (5%) |
| Total Operating Costs and Expenses | $3,685 | $3,484 | 6% |
Cash Flow and Capital Expenditures
For the nine months ended September 30, 2024, McDonald's generated cash provided by operations totaling $6.8 billion, exceeding capital expenditures by $4.8 billion. Cash used for investing activities was $4.6 billion, primarily due to acquisitions and increased ownership in the China market.
Dividends and Share Repurchases
McDonald's paid a dividend of $1.67 per share during the quarter, totaling $1.2 billion. For the nine months, total dividends paid reached $3.6 billion. The company repurchased 1.7 million shares for $444 million in Q3 2024.
Market Trends and Challenges
The ongoing war in the Middle East has negatively impacted McDonald's systemwide sales and revenue, particularly in the International Developmental Licensed Markets and Corporate segment. The company continues to monitor the situation, which affects its operations and financial performance.
Restaurant Information
As of September 30, 2024, the total number of McDonald's restaurants worldwide was 42,819, with a breakdown as follows:
| Ownership Type | 2024 | 2023 |
|---|---|---|
| Conventional franchised | 21,864 | 21,761 |
| Developmental licensed | 9,077 | 8,450 |
| Foreign affiliated | 9,814 | 8,843 |
| Total Franchised | 40,755 | 39,054 |
| Company-owned and operated | 2,064 | 2,144 |
| Total Systemwide restaurants | 42,819 | 41,198 |
Outlook for 2024
McDonald's anticipates that net restaurant unit expansion will contribute nearly 2% to 2024 Systemwide sales growth. The company expects capital expenditures of $2.5 to $2.7 billion for the year and plans to open more than 2,100 restaurants globally.
The effective income tax rate for the full year 2024 is expected to be in the range of 20% to 22%, with an increase in interest expense anticipated due to rising rates and a higher debt balance.
How McDonald's Corporation (MCD) Makes Money
Revenue Streams
McDonald's Corporation generates revenue primarily through three key streams: sales from company-owned restaurants, franchised restaurant revenues, and other revenues. The structure of these revenue streams is designed to maximize profitability while minimizing risks associated with direct ownership of all restaurants.
Company-Owned Restaurant Sales
For the nine months ended September 30, 2024, sales from company-owned and operated restaurants totaled $7,472 million, up from $7,267 million in the same period of 2023, reflecting a 3% increase. The breakdown of sales for the quarter is as follows:
| Region | 2024 Sales (in millions) | 2023 Sales (in millions) | Increase/Decrease (%) |
|---|---|---|---|
| U.S. | $2,417 | $2,401 | 1% |
| International Operated Markets | $4,278 | $4,252 | 1% |
| International Developmental Licensed Markets & Corporate | $777 | $614 | 26% |
| Total | $7,472 | $7,267 | 3% |
Franchised Restaurant Revenues
Franchised revenues are a significant component of McDonald's income, accounting for approximately 95% of its global restaurant base. For the nine months ended September 30, 2024, revenues from franchised restaurants reached $11,756 million, up from $11,568 million in 2023, indicating a 2% growth. The quarterly breakdown is as follows:
| Region | 2024 Revenues (in millions) | 2023 Revenues (in millions) | Increase/Decrease (%) |
|---|---|---|---|
| U.S. | $5,417 | $5,350 | 1% |
| International Operated Markets | $5,039 | $4,889 | 3% |
| International Developmental Licensed Markets & Corporate | $1,300 | $1,329 | (2)% |
| Total | $11,756 | $11,568 | 2% |
Other Revenues
McDonald's also generates income through other streams, which include fees from franchisees for technology platforms and brand licensing. For the nine months ended September 30, 2024, other revenues amounted to $304 million, compared to $252 million in 2023, marking a 21% increase.
Operating Income and Profitability
For the nine months ended September 30, 2024, McDonald's reported total revenues of $19,532 million, up from $19,088 million in 2023, reflecting a 2% increase. The operating income remained stable at $8,844 million, nearly unchanged from $8,845 million in the previous year.
| Operating Metrics | 2024 (in millions) | 2023 (in millions) | Increase/Decrease (%) |
|---|---|---|---|
| Total Revenues | $19,532 | $19,088 | 2% |
| Operating Income | $8,844 | $8,845 | — |
| Net Income | $6,207 | $6,430 | (3)% |
| Earnings Per Share (Diluted) | $8.59 | $8.76 | (2)% |
Franchise Model and Financial Health
The franchise model is critical to McDonald's financial health, as it generates stable and predictable revenue streams. Franchised sales provide the basis for calculating franchised revenues, which do not appear on the company's balance sheet but are indicative of the franchisee's financial performance. For the quarter ended September 30, 2024, total franchised sales were reported at $31,333 million, virtually unchanged from $31,362 million in 2023.
| Franchised Sales | 2024 (in millions) | 2023 (in millions) | Increase/Decrease (%) |
|---|---|---|---|
| Total | $31,333 | $31,362 | (0)% |
| Conventional Franchised | $23,088 | $22,852 | 1% |
| Developmental Licensed | $5,005 | $5,382 | (7)% |
| Foreign Affiliated | $3,240 | $3,128 | 4% |
Cost Structure and Expenses
McDonald's operating costs and expenses totaled $10,688 million for the nine months ended September 30, 2024, compared to $10,243 million in 2023, reflecting a 4% increase. The primary drivers of these costs include food and paper, payroll, employee benefits, and occupancy expenses.
| Cost Metrics | 2024 (in millions) | 2023 (in millions) | Increase/Decrease (%) |
|---|---|---|---|
| Total Operating Costs and Expenses | $10,688 | $10,243 | 4% |
| Company-Owned Restaurant Expenses | $6,358 | $6,149 | 3% |
| Franchised Restaurants - Occupancy Expenses | $1,902 | $1,842 | 3% |
| Selling, General & Administrative Expenses | $1,748 | $1,704 | 3% |
Cash Flow and Shareholder Returns
McDonald's has demonstrated strong cash flow generation capabilities, with cash provided by operations totaling $6.8 billion for the nine months ended September 30, 2024, exceeding capital expenditures by $4.8 billion. The company has also engaged in significant shareholder return activities, including dividends and share repurchases. In 2024, dividends paid were $3.6 billion, with a quarterly cash dividend increase of 6% announced in September 2024.
| Shareholder Returns | 2024 (in billions) |
|---|---|
| Dividends Paid | $3.6 |
| Share Repurchases | $2.3 |
Outlook and Strategic Initiatives
Looking ahead, McDonald's expects net restaurant unit expansion to contribute nearly 2% to 2024 Systemwide sales growth. The company is also focused on maintaining a free cash flow conversion rate in the 90% range, with capital expenditures projected between $2.5 and $2.7 billion in 2024.
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Updated on 16 Nov 2024
Resources:
- McDonald's Corporation (MCD) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of McDonald's Corporation (MCD)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View McDonald's Corporation (MCD)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.