There is no denial McDonald’s(NYSE: MCD) It is the first name for the fast food industry. Not only is the largest chain of hamburger in business (as measured by the number of areas and revenues), but its work has become the golden standard for how to manage the restaurants’ franchise business. For this reason McDonald’s shares is a reliable winner.
But the maker of the millionaire? This is a different story. McDonald’s is still under the ultimately under the health of fast food, which is not a high -growth industry. It may take a long time until a modest investment in this stock turns into an amount of seven numbers.
Except, there is a secret sauce that helps here can perform the task much faster than you think.
But the first thing first.
You of course know the company. As it was observed, with nearly 43,000 stores, McDonald’s is not only the largest Berger name in Restaurant worksBut it can be said that the most famous and nostalgia-dynamic is still working for a fast food chain.
It may not be the company you think it is. Only about 5 % of these sites are owned by the mother company itself. The other 95 % of its restaurants are privileges, run by individuals and third parties that look forward to taking advantage of the strong brand name in a profit.
On the surface, this may seem like trivial details. All the privileges of restaurants agree to manage their business according to the requirements of the concession owner, and buy their supplies and components of service providers. In turn, the concession owner helps the brand support and enhance it.
There are some distinct differences between McDonald’s and most other fast food chains. First, the capital requirements are from McDonald’s, compensation, fees, and operational expectations collectively than the average of the restaurant franchise industry. Secondly, unlike all other fast food privileges, owners of McDonald’s privileges do not have the building from which they already work. They rent it from the father, and they are constantly paying market prices for this access.
For this reason, McDonald’s is often described one of the largest real estate companies in the world – it has more than $ 40 billion of relevant property and equipment. And yes, this makes the world of difference for its shareholders.
Simply put, the owners of McDonald’s concession bear the burden of business risks here. The property rights of the parent company range from 4 % and 5 % of the total sales of each language, whether this store is profitable. The monthly rent payment of each site is also a percentage of the revenues of that store, again without considering the profitability of this store.
Connect points: Even if the store’s operating costs rise, the McDonald’s Corporation itself is not affected much. Its revenues continue to flow and even grow, at least in a step with inflation. The result of the shareholders is of time of time of fixed revenues and the growth of subsequent profits.
However, the real star of the show is McDonald’s profits. The company has not only paid Clockwork since 1976, but it has now collected its annual profit payments for each share every year over the past 48 years. Moreover, I managed to bear this fixed rhythm from the growth of profits. This series is not suitable any time as well, given the massive size of McDonald and its mastery of fast food.
But the biggest question remains: Could McDonalds the share of the millionaire maker?
Yes, it can, although there are important details of the injection in the discussion.
It is clear that McDonald’s is not a growing stock in the same context, for example Nafidia or Amazon. Fast food industry is already well saturated, so most future growth of population growth will stem, even for the strongest name at work. To this end, the profits of this company before interest, taxes, depreciation and firefighting (EbitdaOnly 3.3 % a year has grown over the past few years.
But there is a reason for the improvement of the McDonald’s share by about 1700 % over the past thirty years. This is the other way in which the restaurant’s privilege added a value: by reformulating the shares traded in the open market. In the same time frame, this company used some of its reliable profits to liquidate the number of distinguished shares from approximately 1.4 billion to a little more than 700 million, which improves each financial scale for each share as a result.
This is only half of the secret millionaire -making sauce. The other half uses increasing profits, this company avoids buying more and more shares of its increasing value shares. By re -investing the stock profits paid by McDonald’s since then, an investment of $ 30,000 in early 1994 will be worth a million dollars today.
It is clear that the previous performance is not a guarantee of future results. In fact, it would be completely naive to demonstrate the environment and the opportunity that has been very fruitful for this company over the past thirty years, the same environment in which it will work for 30 years. Investors who are interested in particular should pay attention to the extent of the current and potential concession people in the attractive terms of the franchise in this fast food chain.
However, the winners tend to remain winners if the huge size that maintains competitors. If there is nothing else, at least McDonald’s brings this type of muscle to the table.
The key to you is simply leaving it alone and leaving the time – and redistributing the profits – do the largest part of the work.
Before buying shares in McDonald’s, consider this:
the Motley Adviser is a lie The analyst’s team has just identified what they think 10 best stocks For investors to buy now … McDonald’s was not one of them. The ten shares that made the pieces can produce monster revenues in the coming years.
Look at when Nafidia This list was presented on April 15, 2005 … if you invest $ 1,000 at the time of our recommendation, You will have $ 795728!
Now, it is worth notingStock consultantAverage overall return926 %-Surprisingly in the market compared to177 %For the S&P 500, do not miss the 10 best menu menu.
*The stock consultant dates back from February 7, 2025
John Maki, former Chole Foods Market, a affiliate company, a member of the Motley Fool Board of Directors. James Bromli He has no position in any of the mentioned stocks. Motley Fool has positions in Amazon and Nvidia. Motley deception has Disclosure.
