When I say McDonald's, what comes to your mind ?
Burgers, right ?
But if I tell you that McDonald's is not a burger company.....will you be surprised ?
Then you should be, because IT ISN'T A BURGER COMPANY !!
(1/n)
#burger #mcdonalds
Burgers, right ?
But if I tell you that McDonald's is not a burger company.....will you be surprised ?
Then you should be, because IT ISN'T A BURGER COMPANY !!
(1/n)
#burger #mcdonalds
Yes, McDonald's isn't a Burger company bcoz most of the revenue that McDonald's makes doesn't come from selling burgers !
Then what does it come from ?
Let's take a look at it's financial statements !
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#revenue #financials
Then what does it come from ?
Let's take a look at it's financial statements !
(2/n)
#revenue #financials
If you take a look at the revenue breakdown, out of $21B in total revenue, about $9.4B comes from "company operated restaurants" i.e. from selling burgers !
The remaining revenue of about $11.6B comes from Franchise Royalty and Rent !!
(3/n)
#rent #royalty
The remaining revenue of about $11.6B comes from Franchise Royalty and Rent !!
(3/n)
#rent #royalty
In the words of the former CFO of McDonald's,"McDonald's is not a burger company, it's a Real Estate company!"
So McDonald's rents out property and charges a royalty on using its brand name. The tenant sells McDonald's burgers,pays the rent and royalty and keeps the profit
(4/n)
So McDonald's rents out property and charges a royalty on using its brand name. The tenant sells McDonald's burgers,pays the rent and royalty and keeps the profit
(4/n)
But why does McDonald's do that ? Why doesn't it just sell burgers and keep the entire profit ?
It's a no brainer ! We again take a look at the financial statements given !
Look at the 2 lines below "Operating Cost and Expenses" !
(5/n)
#operations #expenses
It's a no brainer ! We again take a look at the financial statements given !
Look at the 2 lines below "Operating Cost and Expenses" !
(5/n)
#operations #expenses
Did you get it ? Let me help you !
It's bcoz in order to make $9.4B from selling burgers the company has to spend $7.7B !
And to earn $21.6B, from rent and royalty, the company just has to spend $2.2B !
(6/n)
#spend #profit
It's bcoz in order to make $9.4B from selling burgers the company has to spend $7.7B !
And to earn $21.6B, from rent and royalty, the company just has to spend $2.2B !
(6/n)
#spend #profit
So the Franchise business of McDonald's is simply more profitable and way more stable. That why McDonald's does this !
Selling McDonald's burgers gives a good source of income to the tenants to pay the hefty rent of McDonald's !
(7/n)
#rent #realestate
Selling McDonald's burgers gives a good source of income to the tenants to pay the hefty rent of McDonald's !
(7/n)
#rent #realestate
The reason why I brought this up is to show you why you SHOULDN'T invest in stocks yourself !
In the Business world, it's not so straight forward.
If you can't read financial statements like this and interpret its meaning, you should strictly avoid stock picking.
(8/n)
#stocks
In the Business world, it's not so straight forward.
If you can't read financial statements like this and interpret its meaning, you should strictly avoid stock picking.
(8/n)
#stocks
If you pick stocks of something which you don't deeply understand, you could land up in big trouble !
If you know how to read financials, they usually give hints as to when the business is in trouble and when we should sell the stock!
I hope you learned something knew !😊
(n/n)
If you know how to read financials, they usually give hints as to when the business is in trouble and when we should sell the stock!
I hope you learned something knew !😊
(n/n)
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