McDonalds (MCD) Message Board

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Non-Tech : McDonalds (MCD)

MCD 311.02

+0.8%

Dec 5 9:30 AM EST

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To: Andrew who wrote (25)	10/25/1997 4:42:00 AM
From: Fredric D. Bellamy	Read Replies (1) of 288

>>"In summary, in the long term, I see the following effects: Earnings increasing from: 1. Decreased expansion related expenses 2. Dollar not rising forever 3. Higher margins as proportion of company-owned restaurants decreases 4. Capital gains as MCD sells off the company owned stores (like KO does with bottlers - spectacular results) Free cash flow exploding because of: 1. Much higher net earnings (see above) 2. Much lower capital expenditures as rate of expansion slows Could you comment on how likely this whole scenario sounds?"<< Andrew, in light of your post, you may find the following article interesting: text.morningstar.net It is by a Morningstar analyst, and she examines Warren Buffett's purchase of Dairy Queen. Her take is that DQ will provide a reliable income stream without major capital expenses because DQ merely collects royalties from franchisees. Hence, DQ throws off a nice free cash flow. Your analysis, of course, would put MCD in the much the same boat. MCD's planned slowing in the rate at which MCD will open new stores (compared with earlier plans) seems consistent with your views.

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