Recent Posts

MCD: Adjusting Our Forecasts (7/8/2024)

This morning, we published an industry report entitled “Updating our Q2 Kalinowski Quick-Service Burger Same-Store Sales Index.” We encourage you to read that report in conjunction with this McDonald’s note.

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1:38 PM

MCD: It’s About Clucking Time

As ubiquitous as it is, chicken continues to gain in popularity in multiple ways, including with quick-service consumers. McDonald’s noted on its February 5th conference call that “Our chicken category now represents $25 billion in annual Systemwide sales, on par with beef.” This is, of course, a worldwide figure. Specific to McDonald’s U.S., beef apparently maintains a lead over chicken. But no doubt, McDonald’s is working to capture more chicken market share in the U.S.

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1:29 PM

MCD (Post-Call): A Challenging Q1 in What Looks to be a Challenging 2024

Earlier today, McDonald’s reported Q1 adjusted EPS of $2.70. This compares with our $2.70 forecast and sell-side consensus (according to Consensus Metrix) of $2.71. The Q1 tax rate came to 19.9%. This was more favorable than our 21.0% projection and consensus of 20.8%. By our math, the modestly more favorable-than-expected tax rate helped Q1 EPS by about +4 cents.

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9:58 AM

MCD: Adjusting Our Forecasts (4/8/2024)

This morning, we published an industry report entitled “Updating our Q1 Kalinowski Quick-Service Burger Same-Store Sales Index.” We encourage you to read that report in conjunction with this McDonald’s note.

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7:00 AM

MCD: How Much in Sales Could the Krispy Kreme Partnership Add?

Earlier today, McDonald’s and Krispy Kreme (KREM; Not Rated) announced that they “are teaming up for a national expansion. Fans will begin spotting Krispy Kreme doughnuts in their local McDonald’s restaurants later this year as part of a phased market rollout across the country. Nationwide availability at participating restaurants is expected by the end of 2026. Three of Krispy Kreme’s most popular doughnuts will be delivered fresh to McDonald’s restaurants every day. They’ll be available individually, or in boxes of six, starting at breakfast and lasting throughout the day – while supplies last.” For more info:

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7:38 AM

MCD: Part 2 of McDonald’s Franchisee Survey Looks at CosMc’s

Today we publish part two of two of the January 2024 edition of our proprietary McDonald’s Franchisee Survey. As part of this, we asked our franchisee contacts to provide some of their initial impressions of CosMc’s, the new beverage-focused concept for which McDonald’s opened unit #1 late last year. While this first CosMc’s was opened in Illinois, the next several are planned for Texas. (The second CosMc’s in the U.S. is apparently being planned for San Antonio.) For more info:

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7:00 AM

MCD: Updating Our Forecasts (12/27/2023)

Back on September 5th, we published a report looking at some recent currency-translation effects on McDonald’s quarterly EPS. That report included our formula for projection the currency effect on a given quarter’s EPS, and is available at:

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7:00 AM

MCD: Updating Our Forecasts

Following the October 7th acts of war by Hamas that included the murders of 1,400+ individuals in Israel, the official Twitter** account of McDonald’s Israel commented multiple times that it has provided free meals to members of the IDF (Israel Defense Forces). For example, McDonald’s Israel tweeted** on October 17th that “From the first day of the war, McDonald’s Israel has donated 100,000 meals to the IDF, security forces, hospitals, and the residents of the surrounding area.” (translated from Hebrew)

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7:00 AM

MCD: Updating Our Projections

Back on September 5th, we published a report looking at some recent currency-translation effects on McDonald’s quarterly EPS. That report included our formula for projection the currency effect on a given quarter’s EPS, and is available at:

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7:00 AM

MCD: Part 2 of McDonald’s Franchisee Survey Discusses Krispy Kreme Doughnuts

Today we publish part two of two of the July 2023 edition of our proprietary McDonald’s Franchisee Survey. This report examines whether our franchisee respondents would like to sell Krispy Kreme (KREM; Not Rated) doughnuts in their own McDonald’s restaurants. As a reminder, back on June 29th, we published a report in which we indicated that we believe the 160 McDonald’s restaurants in Kentucky testing the sale of Krispy Kreme doughnuts in those restaurants are seeing average weekly sales of 800-900 doughnuts per restaurant. In addition, those sales appear to be highly incremental. Furthermore, an argument can be made that the sales of the Krispy Kreme doughnuts are helping to drive incremental sales of some non-doughnut menu items. For more info:

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7:00 AM

MCD: Part 2 of McDonald’s Franchisee Survey Discusses Krispy Kreme Doughnuts

Today we publish part two of two of the July 2023 edition of our proprietary McDonald’s Franchisee Survey. This report examines whether our franchisee respondents would like to sell Krispy Kreme (KREM; Not Rated) doughnuts in their own McDonald’s restaurants. As a reminder, back on June 29th, we published a report in which we indicated that we believe the 160 McDonald’s restaurants in Kentucky testing the sale of Krispy Kreme doughnuts in those restaurants are seeing average weekly sales of 800-900 doughnuts per restaurant. In addition, those sales appear to be highly incremental. Furthermore, an argument can be made that the sales of the Krispy Kreme doughnuts are helping to drive incremental sales of some non-doughnut menu items. For more info:

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7:00 AM

MCD: Look for Krispy Kreme Doughnuts Test to Expand to More McDonald’s Restaurants

On February 27th, Krispy Kreme Doughnuts (KREM; Not Rated) announced that “McDonald’s is bringing Krispy Kreme doughnuts to even more local restaurants with an expanded market test. Starting March 21, we’ll be serving three Krispy Kreme fan faves – the Original Glazed Doughnut, the Chocolate Iced with Sprinkles Doughnut and the Chocolate Iced Kreme Filled Doughnut – at approximately 160 locations across Louisville, Lexington and the surrounding area. The expanded test will help us learn more about operational impact on a larger scale as well as explore customer demand. And this time around, there are even more ways for fans to satisfy their Krispy Kreme craving, with doughnuts available all day in-restaurant, at the Drive Thru, via McDelivery and on the McDonald’s App.” For more info:

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7:00 AM

MCD: Updating Our Projections

McDonald’s enjoyed a solid Q1 in a lot of respects, including generating +12.6% same-store sales growth in the U.S. market. On its April 25th conference call, management noted that “as far as outlook for the business, we remain very confident about how we’re positioned. We remain confident, as I said in our press release. The demand, the consumer demand for our brand remains strong. So there’s no change from our perspective in terms of how we’re feeling about rest of the year. Certainly we have, in quarter one, the benefit of lapping Omicron, and the whole industry does. We also, as I mentioned in our last call, had more favorable weather in January. So we had some things going on in January that, from an industry standpoint, made this an easier compare. But our outlook for the rest of the year, we expect to continue taking share. We’ve been taking share pretty consistently now for several years. Our outlook is we’re going to continue to take share through the balance of 2023.”

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7:00 AM

MCD: Franchisee Comments Provided to the FTC

Back in March, the U.S. Federal Trade Commission (FTC) solicited comments from the public – including franchisees – regarding “Provisions of Franchise Agreements and Franchisor Business Practices.” At the time, the FTC noted that:

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7:00 AM

MCD: Should McDonald’s Relocate its Headquarters Far Away from Chicago?

McDonald’s was headquartered in a suburb of Chicago — Oak Brook — from 1971-2018. For most of that time, the site within Oak Brook that served as McDonald’s headquarters was the 80-acre McDonald’s campus. In 2018, McDonald’s moved its headquarters from Oak Brook to Chicago – more specifically, 110 North Carpenter Street. That site is part of Chicago’s Near West Side neighborhood. (The former McDonald’s campus in Oak Brook is becoming the new headquarters for Ace Hardware.)

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7:00 AM

MCD (Post-Call): Who is Ronald McDonald’s Favorite Rock Star? McJagger

Earlier this morning, McDonald’s reported its Q1 adjusted EPS amounted to $2.63, meaningfully above our $2.40 projection and sell-side consensus (according to Consensus Metrix) of $2.33. We calculate that the adjusted tax rate came to 19.4%, which was more favorable than our 21.0% estimate and consensus of 21.0%. By our math, the more favorable tax rate added about +5 cents to adjusted EPS, relative to our estimate.

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9:39 AM

MCD: Part Two of McDonald’s Franchisee Survey Discusses the Chicken Big Mac

Today we publish part two of two of the April 2023 edition of our proprietary McDonald’s Franchisee Survey. This report examines whether McDonald’s U.S. should launch a Chicken Big Mac nationwide, or not. This report also provides some general thoughts from the franchisees about any topic currently at the forefront of their minds.

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8:31 AM

MCD: Updating Our Forecasts (Again) for McDonald’s

Back on February 20th, we raised some of our same-store sales and EPS estimates for McDonald’s, based on what appeared to have been very good domestic same-store sales trends for January and the beginning of February, helped by factors such as favorable year-over-year weather, and lapping the Omicron variant of Covid.

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7:00 AM

MCD: Updating Our Forecasts

Along with much of the U.S. restaurant industry, McDonald’s likely enjoyed an outstanding January in terms of U.S. same-store sales, helped by various factors including (1) favorable year-over-year weather, and (2) lapping Omicron.

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8:55 AM

MCD: Letter from Franchisee Leadership Highlights Cash Flow Challenges

McDonald’s has enjoyed numerous, sizable successes over the decades. Nevertheless, our proprietary McDonald’s Franchisee Survey has – for numerous years – highlighted that at times, relations between McDonald’s corporate and the U.S. franchisee base can be strained. Of course, we are not the only sources of such info highlighting franchisee discontent — and even anger.

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11:31 AM

MCD (Post-Call): Impressive Sales Trends, But Cautious on 2023 Margin Outlook

Earlier today, McDonald’s reported Q4 EPS of $2.59, ahead of our $2.48 estimate and sell-side consensus (according to Consensus Metrix) of $2.46. Factors helping EPS in Q4 included robust same-store sales, higher-than-expected nonoperating income, and a more favorable tax rate than anticipated. On the other hand, SG&A/Revenues came in higher (worse) than expected.

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9:48 AM

MCD: Part 2 of Franchisee Survey Looks at the “Best Burger” Initiative

Today we publish part 2 of 2 of the January 2023 edition of our proprietary McDonald’s Franchisee Survey. This report focuses on franchisees’ thoughts as to the “Best Burger” (a.k.a. “Better Burger”) initiative – involving cooking with smaller batches of beef patties, adding onions while the burgers are on the grill, etc. — that McDonald’s is implementing in the U.S. over the first six months of the year. This report also provides some general thoughts from the franchisees about any topic currently at the forefront of their minds.

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7:00 AM

MCD: Franchisee Survey Part Two Examines Possible Sales During a Recession

Today we publish part 2 of 2 of the October 2022 edition of our proprietary McDonald’s Franchisee Survey. This report focuses on franchisees’ thoughts as to how sales trends might fare should. There be a recession for part or all of 2023. This report also provides some general thoughts from the franchisees about any topic currently at the forefront of their minds.

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7:00 AM

MCD: Franchisee Survey Part One, Updating Forecasts

McDonald’s plans to release its Q3 earnings before the market open on Thursday, October 27th. Ahead of that, we publish part one of our two-part, proprietary McDonald’s Franchisee Survey today. (Look for part two, which will discuss McDonald’s potential sales performance in a possible 2023 recession, either later this week or early next week.)

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7:00 AM

MCD: Building a Happy Meal for Investors

There are multiple potential positives regarding McDonald’s U.S. business that the Street may not be currently appreciating. For example, McDonald’s reported its Q2 earnings on July 26th, but did not quantify (or otherwise meaningfully comment on) July same-store sales trends at that time. Subsequent to that date, though, Wendy’s (WEN; Buy, $21.40) noted on its August 10th conference call that “we expect a significant step-up in one-year same-restaurant sales in the back half of the year, and our results through July are accelerating as planned.” In addition, on August 11th, the largest Burger King franchisee in the U.S., Carrols (TAST; Not Rated) – which operates over 1,000 Burger King restaurants – remarked that “During the second quarter, comparable restaurant sales at our Burger King restaurants increased 2.8% against a robust 12.6% comparison from the prior year period. The monthly sales trend demonstrated building momentum, with negative comparable restaurant sales in April as we lapped the end of the stimulus payments benefit, followed by mid-single digit growth in both May and June which has extended into July.” We believe that these trends are indicative of a good July for the U.S. quick-service burger sector in general, including segment leader McDonald’s (which we believe outperformed the sector to some degree).

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7:00 AM

MCD (Post-Call): Comforting Fundamentals in a Tough Environment

Earlier today, McDonald’s reported adjusted Q2 EPS of $2.55, in between our $2.60 estimate and sell-side consensus (according to Consensus Metrix) of $2.47. Excluding one-time items, the Q2 adjusted tax rate was 18.7%, more favorable than our 21.0% projection and consensus of 20.8%. We calculate that Q2 EPS was helped by the more favorable-than-expected tax rate by about +6 cents, relative to consensus.

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9:56 AM

MCD: McDonald’s Franchisee Survey Part 2 Discusses Relations with Corporate

Today we publish part 2 of 2 of the July 2022 edition of our proprietary McDonald’s Franchisee Survey. This report focuses on franchisees’ thoughts as regards their relationship with corporate. This is in the context of The Wall Street Journal reporting on June 23rd that “McDonald’s Corp. is planning to make some of the biggest changes in decades to the franchising system that underpins its U.S. operations, as it seeks to reinvigorate its base of restaurant owners. Executives this week notified the burger chain’s franchisees that they will have to go through a more stringent review every 20 years to keep their restaurants…. McDonald’s will consider new factors, like performance history, as it asks owners to apply to keep their locations. The company will consider new factors, such as customer complaints, to determine which McDonald’s franchisees can add new locations. In a shift that could affect some of the chain’s longest-tenured restaurant operators, McDonald’s is also requiring that some next-generation heirs put up more cash to keep operating their locations — and to designate a single family member as the operator…. McDonald’s anticipates it will begin to implement the franchising changes next January.” For more info:

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7:00 AM

MCD: McDonald’s Franchisee Survey Part 2 Discusses Market Share

Today we publish part 2 of 2 of the April 2022 edition of our proprietary McDonald’s Franchisee Survey. This report focuses on franchisees’ thoughts as regards market-share trends and opportunities over the next 3-5 years. This report also provides some general thoughts from the franchisees about any topic currently at the forefront of their minds.

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7:00 AM
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