Cannot be denying McDonald’s(Nyse: McD) is the top quality of the fast food industry. Not only is it the largest hamburger chain in business (measured by the number of sites and revenues), it also became its actions to the gold standard in which the restaurant’s franchise operation should be managed. That’s why McDonald’s Stock is such a reliable winner.
But a millionaire manufacturer? That’s a different story. McDonald’s is still ultimately subject to the health of fast food business, which is simply not a high growth industry. It could take a long time to turn the modest investment in this section into a seven -digit amount.
Apart from, here it helps the secret sauce that the job could do much faster than you might think.
But first things.
Of course you know the company. As noted with nearly 43,000 stores, McDonald’s is not just the biggest name of a burger in restaurantBut probably the most famous and unnecessary-dynamic still works in favor of a fast food chain.
However, this may not be a company you think it is. Only about 5% of these locations are actually owned and managed by the parent company. The other 95% of his restaurants are franchises, which are managed by individuals and third parties who want to use the powerful name of the brands in profit.
On the surface, this can be done with trivial details. All restaurant franchises agree to run their job in accordance with the franchise requirements, after all, and buy supplies and ingredients from approved service providers. In return, the franchisee helps with support and promotion of the brand.
However, there are several different differences between McDonald’s and most other fast food chains. First, the capital requirements of McDonald’s capital, fees, fees and operational expectations are collectively higher than the average restaurant franchise industry. And secondly, unlike almost all other fast food franchises, McDonald’s franchise doesn’t really have the building they operate. They rent it from his parents, paying all the growing market prices for this approach.
Because of this, McDonald’s is often described by one of the world’s largest real estate companies – it has property and related equipment worth more than $ 40 billion. And yes, that makes the world of difference to its shareholders.
Simply put, McDonald’s franchises here carry a big risk of business risk. Royal companies rates are between 4% and 5% of gross sales of each local town, whether this store is profitable. The monthly payments of the rent of each location are also the percentage of the revenue of that trade, again regardless of the profitability of that trade.
Connect the dots: even if shopping costs are increased, McDonald’s Corporation does not affect much on its own. His revenue continues to flow and even grow, at least in step with inflation. The appearance for shareholders is usually a decade worth of permanent revenue and subsequent profit growth.
The real star of the show, however, is McDonald’s dividend. Not only did the company pay one like Clockwork since 1976, it has increased annual dividend payments per share every year in the last 48 years. Moreover, it managed to afford this permanent growth cadence of dividend. This string cannot be completed soon, given McDonald’s pure size and its mastering fast food jobs.
But the bigger question remains: can McDonald’s be a millionaire shares?
Yes, he could, although there is an important detail for injection into discussion.
McDonald’s obviously not a growth stock in the same sense as, say Nvidia or Amazon. The fast food industry is already quite saturated, so most of the future growth will come from mere population growth, even for the strongest name in business. For this purpose, the earnings of this company before interest, tax, depreciation and depreciation (depreciation (EBITDA) In the last few years, it has only increased about 3.3% per year.
But there is a reason that the price of McDonalds shares has improved by almost 1,700% over the last 30 years. This is another way in which the restaurant franchise added value: buying shares circulating in the open market. In the same time frame, this company used part of a reliable profit to halve its unclean number of stakes with approximately 1.4 billion to just over 700 million, improving all fiscal metrics per share as a result.
This is, however, only half of the sauce of secret millionaires. The other half is the use of growing dividends that this company cares about buying more and more shares of its increasingly valuable shares. With the repeat of Dividend McDonald’s, he has been paying off since then, investments in the amount of $ 30,000 in the 1994 wound would be worth a million dollars today.
Obviously, past performance is not a guarantee of future results. Indeed, it would be completely naive to convert to the environment and the opportunity that were so fertile for this company over the last 30 years, the same environment in which they will operate in the next 30. Interested investors should particularly approach the attention of being interested in existing and potential franchises They remain in this rapid attractive franchise expression of fast food chain.
However, the winners tend to remain winners, just because of what is usually a huge size that holds competitors in the check. If nothing else, McDonald’s at least brings such a muscle to the table.
The key to you is easy to leave him alone and let go of the time – and the dividend reinvestment – to do most of the work.
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John Mackey, former Whole Foods Market CEO, Amazon Branch, is a member of the Board of Directors Motley Fool. James Brumley There is no position in any of the shares mentioned. Motley Fool has positions and recommends Amazon and Nvidia. Motley Fool has disclosure rules.
