Restaurants have notorious low profit margins. But McDonald’s(Nyse: McD)The world’s largest restaurant chain is surprisingly one of the most profitable companies. In fact, his profit margins are larger than prestigious companies like Tesla(Nasdaq: Tsla),, Apple(NASDAQ: AAPL)and Netflix(NASDAQ: NFLX).
I would have to clarify that profit can be measured from multiple corners. But one of the best ways to measure profits is with Operational margin. This metric excludes things that are not related to regular business operations – such as taxes, which can be swollen wild year by year – and focuses only on the profit that the job produces.
February 10, McDonald’s reported on financial results for 2024. During the year, the company had a stellar operating margin of 45%. It’s among the best in the world. And as the chart shows below, it is far better than operating margins for companies such as Tesla, Apple and Netflix.
Assuming that the fundamental jobs are burgers and fries, McDonald’s makes a $ 45 operating profit for every $ 100 that has on sale. This would suggest that his food was incredibly overrated. But if you assume that food sales is a basic job for McDonald’s, you are wrong.
McDonald’s managed margins as good or better than even the most profitable technological companies because it is not in business in itself. And it’s really an interesting thing that investors can mention, as I will explain.
From this writing, I still wait for McDonald’s to submit its annual report, which contains more detailed financial services than what he usually reports to investors. Therefore, let me mention some numbers 2023 for illustrative purposes. 2023. McDonald’s total revenue of $ 25.5 billion. Of these, he made $ 15.4 billion (over 60% of total revenue) from his franchise restaurants – restaurants operated by independent third parties.
Most franchised revenues for McDonald’s come from a particularly surprising source. As it turns out, the company has a lot of real estate that rents with its franchises. He received $ 9.8 billion in revenue from renting at 2023.
At the end of 2023, McDonald’s had over $ 27 billion real estate, looking at the land owned and the buildings on the mainland she owned. It gives McDonald the largest portfolio of real estate from any restaurant company in the world. And this dynamics go a long way to explain why it has operational margins that are so high compared to other restaurant chains.
In other words, McDonald’s primarily offers third franchises to run a job at a restaurant. The company provides franchises Mark, a system and even a building. Franchise providers sell classic burgers and fries, which is a much lower job. But the parent company gets author’s fees and revenues from rent, which is so high Marz that even software companies are jealous.
McDonald’s expects his operating margin to further improve in 2025, and even a modest improvement can still result in a big increase in operating profit given how huge the job is.
Another interesting thing to consider is that McDonald’s has about 43,000 restaurant locations today, but expects to surpass 50,000 in 2027. It is a 16% increase in just three years, which is quite significant for the job of this size. And since most growth will come from the franchise, expect a respectable increase in its revenue with high margins.
Considering how big and tall Mark this job is, I think that McDonalds’ stock is one of the safest investments that one could invest in-other words, I believe there is a little chance of losing money in the long run. Considering McDonald’s size, I would say he doesn’t necessarily have to have the greatest potential. But it could still be worth holding, and it’s worth watching in case the price ever falls on a particularly attractive estimate.
Have you ever felt like you missed the ship in buying the most successful stocks? Then you will want to hear it.
On rare occasions, our expert team of analyst issues “Double” supplies Recommendation to companies they think will appear soon. If you are worried that you have already missed the opportunity to invest, now is the best time to buy before it is too late. And numbers speak for themselves:
Nvidia:If you invested $ 1,000 when we doubled in 2009,You would have $ 350,809!*
Apple: If you invested $ 1,000 when we doubled in 2008, you would have $ 45,792!*
Netflix: If you invested $ 1,000 when we doubled in 2004, you would have $ 562,853!*
We are currently releasing “double down” warnings for three incredible companies, and maybe there will be no other chance like this.
Jon Quest There is no position in any of the shares mentioned. Motley Fool has positions and recommends Apple, Netflix and Tesla. Motley Fool has disclosure rules.
