Summary of McDonald's 10k 2023

These are some of the basic notes after reading MCD's 10k 2023. This is not detailed analysis but basic info based on the public filing.

If you have any suggestion or clarifications please send me message through "contact me".

10k 2023:

• Over 100 countries, 41,822 locations, 95% franchised. 
• Over 150k company’s employees, 70% based outside US.  Over 2 mil work in MCD’s restaurants. 
• Three major franchised locations operated under: conventional, developmental license, affiliate. 
• Conventional:
  • Company own/leases land and building, franchisee pays for initial capital and reinvesting capital. 
  • Franchisee pay specified minimum rent, royalties on sales, initial fees
• Developmental License:
  • Licensee responsible for operating and managing business, providing capital and developing restaurant. 
  • Company does not invest any capital but receives initial fees and royalty on sales. 
• Affilate:
  • Similar to developmental license but mainly used in China. 
  • Also in some International Operations Market where company has equity investment and get share of net earnings. 
• By end of 2024 company expects:
  • Selling, general and admin expense to be ~2.2% of systemwide sales
  • Interest expense increase 9% to 11% because of high debt balance and higher interest rate
  • Income tax 20% to 22%
  • Cap Ex to $2.5 bil to $2.7 bil
  • Open 500 new location in US and 1,600 more in International market and affiliates. 
  • Free cash flow conversion rate of 90%
• Three Main Segment:
  • US:
    • 41% of revenue
    • 43% operating Income
    • 95% franchised
  • International Operated Markets
    • 49% of revenue
    • 44% operating income
    • 89% franchised
  • International Developmental Licensed Markets and Corporate
    • 10% of revenue 
    • 13% operating income
    • 98% franchised
• Debt:
  • Commercial paper ratings: S&P A-2, Moody’s P-2
  • Long term debt rating: BBB+, Baa1
  • To lower impact of forex fluctuations and interest rate change, uses interest rate swaps and finances in local currencies. 
  • It has exposure to British pounds £, AUD, CAD, NZD and weirdly Polish Zloty. (Weird, other major currencies makes sense like Pound and AUD but not sure why zloty.)
• Total of about 4.5 mil number of shareholders. 
• Properties: When thinking about new location it considers: traffic pattern, walking pattern, census data and so on. 
• Cash Flow Hedges:
  • Foreign currency forwards to hedge portions of anticipated exposures. Hedge cover unto 18 months of certain exposure.
  • Treasury locks to hedge portions of expected future cash flows. 
• Net Investment Hedge: 
  • Uses foreign currency denominated debt and foreign currency derivatives to hedge investments. 
• Other Hedges:
  • Equity derivatives contracts including total return swaps to hedge market driven changes in supplement benefit plan. 
  • Foreign currency forwards to deal with changes in foreign currency assets. 
• Debt Financing:
  • $4 billion of line of credit. Fee of 0.08% annually on total commitment that is unused. 
  • Average interest rate on short term borrowing: 5.4%
• On Jan 30, 2024 increased ownership of MCD business in China, Hong Kong and Macau from 20% to 48%. CITIC maintains 52% control. 
• Subsidiaries (exhibit 21): Has 8 subsidiaries in Delaware, 15 in international from UK to Poland to Korea.