CramersPosseSam YoungJason LinderAlex Vong

Company Profile

First McDonald’s opened 1940 in San Bernardino, CA(Dick and Mac McDonald)

“Speedee Service” (1948) set standard for fast food First franchised restaurant opened 1955

=> Founding of the McDonald’s Corporation

Today:Headquarters: Oak Brook, IL31,000+ locations worldwide>1.5 million employees>$20B annual revenue

Key Statistics (Stock)

52wk Range $46.64 - $63.69

Avg Vol (3m) 7,767,640

Market Cap $69.03B

P/E (TTM) 27.52

EPS $2.15

Div & Yield $1.50 (2.50%)

1y Target Est $64.70

Business Overview

Franchises the majority of its restaurants Franchises generate revenue for the corporation through rent,

commissions, and initial fees

Avoids having to invest a significant amount of capital in its restaurants

Business Overview (cont’d)

Three main business strategies:1. Predicting and responding to changes in consumer tastes and

preferences, demographics and spending patterns. Adjusts menu accordingly

2. Maximizing sales at existing restaurants Remodeling restaurants, increasing kitchen efficiency,

streamlining drive-thru ordering

3. Opening new restaurants About 1,000 new units planned for 2008 Total number of restaurants growing at 1%-2% per year

Business Financials

Year 2007 2006 2005

Total Revenues $22.8B $20.9B $19.1B

Company-operated sales

$16.6B $15.4B $14.0B

Franchise/Affiliate revenues

$6.2B $5.5B $5.1

Franchise/Affiliate sales

$46.9B $41.4B $38.9B

Operating Income $3.9B $4.4B $4.0B

Industry Analysis

Industry: Restaurants; Consumer Discretionary Goods Food and dining experience Demand varies with disposable income

Substitute with home-cooking Sensitivity related to opportunity cost

Competitors

Company-operated sales

Operating income

Company-operated restaurants

Franchised restaurants

Sales per restaurant

P/E (TTM)

MCD $16.1B $4.45B 8.79K 18.7K $1.83M 27.52

WEN $2.16B $42M 1.47K 5.21K $1.4M 30.19

YUM $8.37B $1.26B 7.74K 23.5K $1.08M 21.70

BKC $1.66B $291M 1.3K 9.98K $1.19M 21.93

Stock Performance

Stock Performance (cont’d)

Technical Analysis

Buy signals

Technical Analysis (cont’d)

Buy signals

Sell signals

CramersPosse purchased MCD on 4/28

Perhaps too late…

Strengths

Many locations International presence

Perpetual demand for fast food Reliable, quick, efficient, CHEAP

Dollar menu especially popular

Wide variety of foods to appeal to a wide range of consumers

Weaknesses

Serves largely unhealthy food (see Threats)

Dining experience not special Ubiquity Convenience food, not pleasant dining experience

Diminishing returns to operating single brand? New types of restaurants needed?

Opportunities

Spin-off brands New restaurants offering richer, more satisfying customer

experience Economies of scope advantages?

Healthier products Compete with Subway and “healthy fast food” alternatives

Threats

Health concerns Public becoming more health-conscious about food Bad publicity about McD’s and health

Super Size Me, Fast Food Nation

Competition Competitors eating into profit margins through promotions and

value pricing strategies Smaller fast food restaurants growing in popularity (e.g., In-N-

Out, Sonic)

Recommendation

Recommendation: Hold

McDonald’s has a “tried and true” business model with a strong international presence. It is very solid for those reasons. On the flipside, its maximum growth potential may be limited (extensive, rather than intensive growth).