On May 9 Tim Fenton sold 9,938 McDonald's shares @ $102.36 for a net of $1,017,253. .
8 comments:
Anonymous
said...
He will probably be cashing in more so he can pay cash for the restaurants he will be purchasing. It looks like he has cashed in about $7.5MM in the last three years. I guess it won’t be to tuff being an operator with little or no debt.
Seems like a bad investment choice for him being a franchisee? He either feels McDonald’s Stock will not be going up and cash is better parked in restaurants but earning about 10%-16% cash on cash operating restaurants. Seems like there are better places to park money with less work? Unless he is getting McCopCo’s on the cheap or an distressed operator selling.
After G&A he will really see what it is like to be an operator where his return will be most likely under 10%.
I find it hard to believe why anybody with a higher level of Finance, with sum of Capital would consider investing in McDonalds from scratch. I can see if you are an existing operator with multiple stores. However an investment that requires perpetual investing in items that depreciate for a marginal return with all the requirements to satisfy Wall Street. Now you know why they are empowering managers to do all. To get their next herd of Manage/Operator since they would need to manage just to make a living
Investing to remodel in today's world means spending over one million dollars per traditional location. Unless the property is owned by the remodeler and not the Landlord this formula does equate to a sound investment.
Land equity appreciates, new decor and leaseholds depreciate. If cashflow decreases, well then you just have yourself a great job in a nice environment.
An operator cannot just cash in anytime they want like Fenton ....or maybe they can, but they will have to pay off the bank first.
But McDonald’s isn’t asking Operators to make good business decisions or smart financial investments for themselves, you are being asked to make “system investments”.
Occasionally I’m contacted by persons interested in becoming a McDonald’s Operator. While I can’t actually help them do that I’m a good source for those trying to learn more about the business model. One can’t discuss the McDonald’s franchise without describing the landlord-tenet relationship and the reinvestment requirements.
Some of these people ask, “Why would anyone do that?”. Others have already made up their minds and are so excited and determined to be in McDonald’s they only want to talk about the culture, how the Co-Ops work, the conventions etc. Profits? ROI? With this second group it rarely comes up.
In much the same way existing Operators vary in their motivations. There’s a certain group (including many corporate people) who can’t imagine life outside McDonald’s.
So these Operators, or potential Operators, make “System Decisions” and “System Investments” with the goal of staying in the system forever if possible.
For the majority, it is not by the same eagerness they had when they first became McDonald's operators that they stay within the system. Albeit it is the financial predicament of business equity evaluation that forces them to stay within.
When your cashflow is multiplied by 5 or 6 times to calculate a business worth and then you pay off your reinvestment loans, you end up with less money than when you first purchased your franchise. Not so if you owned the property.
In the natural, one would have to remain just to make a decent living with benefits and such, while Corporate McDonald's has gained a 24/7 individual that must continue to run a great operation to pay off non-controllable rent and loan expenses forever.
8 comments:
He will probably be cashing in more so he can pay cash for the restaurants he will be purchasing. It looks like he has cashed in about $7.5MM in the last three years. I guess it won’t be to tuff being an operator with little or no debt.
Seems like a bad investment choice for him being a franchisee? He either feels McDonald’s Stock will not be going up and cash is better parked in restaurants but earning about 10%-16% cash on cash operating restaurants. Seems like there are better places to park money with less work? Unless he is getting McCopCo’s on the cheap or an distressed operator selling.
After G&A he will really see what it is like to be an operator where his return will be most likely under 10%.
And he's probably assuming the stores won't depreciate in value.
If he gets McCopCo's they have built in automatic appreciation!
Just operate them like a restaurateur with pride in your business sales an cash flow will go up.
Kind of like flipping houses, buy a property that's been trashed for a cheap price and fix it up.
I find it hard to believe why anybody with a higher level of Finance, with sum of Capital would consider investing in McDonalds from scratch. I can see if you are an existing operator with multiple stores. However an investment that requires perpetual investing in items that depreciate for a marginal return with all the requirements to satisfy Wall Street. Now you know why they are empowering managers to do all. To get their next herd of Manage/Operator since they would need to manage just to make a living
Investing to remodel in today's world means spending over one million dollars per traditional location. Unless the property is owned by the remodeler and not the Landlord this formula does equate to a sound investment.
Land equity appreciates, new decor and leaseholds depreciate. If cashflow decreases, well then you just have yourself a great job in a nice environment.
An operator cannot just cash in anytime they want like Fenton ....or maybe they can, but they will have to pay off the bank first.
But McDonald’s isn’t asking Operators to make good business decisions or smart financial investments for themselves, you are being asked to make “system investments”.
Occasionally I’m contacted by persons interested in becoming a McDonald’s Operator. While I can’t actually help them do that I’m a good source for those trying to learn more about the business model. One can’t discuss the McDonald’s franchise without describing the landlord-tenet relationship and the reinvestment requirements.
Some of these people ask, “Why would anyone do that?”. Others have already made up their minds and are so excited and determined to be in McDonald’s they only want to talk about the culture, how the Co-Ops work, the conventions etc. Profits? ROI? With this second group it rarely comes up.
In much the same way existing Operators vary in their motivations. There’s a certain group (including many corporate
people) who can’t imagine life outside McDonald’s.
So these Operators, or potential Operators, make “System Decisions” and “System Investments” with the goal of staying in the system forever if possible.
For the majority, it is not by the same eagerness they had when they first became McDonald's operators that they stay within the system. Albeit it is the financial predicament of business equity evaluation that forces them to stay within.
When your cashflow is multiplied by 5 or 6 times to calculate a business worth and then you pay off your reinvestment loans, you end up with less money than when you first purchased your franchise. Not so if you owned the property.
In the natural, one would have to remain just to make a decent living with benefits and such, while Corporate McDonald's has gained a 24/7 individual that must continue to run a great operation to pay off non-controllable rent and loan expenses forever.
Is this what McDonald's wants for Operators?
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