Any McDonald's Shareholders?

[MichealKnight]

My goals for hitting consistent singles and doubles....less than that sort of hurts, more than that is a bonus.

MCD has been - by my standards a core holding and over the last 3 years I've done well with it. And I still totally believe in the growth story - yet a few months ago I read that McD's India franchisee reported an 'ok' quarter. Expansion plans are still in effect, a middle class is growing exponentially so again - on India alone I like MCD but that wasn't comforting to hear.

A week or so ago. I reduced my MCD shares by 30%. I think my avg sale price was $293 and right now it's around 285.

Question to MCD shareholders: Any thoughts on a potential fast food price war looming? This was the reason I reduced my position.

Social media (which I feel is one sided and unfair) spotlighted a few receipts and of course nowadays, execs at companies are 24/7 Digital this, Digital that so I feel they are scared and therefore reacting.

*Burger King is sending out old fashioned coupons with GOOD deals

*McD is now advertising some decent deals - Filet O' Fish 2 for $4.00

*KFC's $20 combo - while $20- is a pretty decent spread.

Chile's - while not fast food glommed onto the Social Media critique by smartly advertising $10.99 burger meal where the narrator says "At current fast food prices....even they want you to come to Chile's."

Anyhow - I'm not sure if their labor costs are gonna drop. So I guess my questions on your thoughts:

*Is there pricing pressures coming - OR is it just food inflation reducing?

*If it is pricing pressures - and labor costs stay the same - bottom line is that not a 'negative' for customary earnings growth?

*On labor: No doubt they will have more tech and A.I.....but I'm not sure that's happening today.

*Real Estate: I dont know if McD Self finances its real estate but commercial loans will eventually come due and be re-written at slightly higher rates even with MCD's good credit.

Anyhow, thanks for reading, would like to hear opinions if you have them.

Once a week I check on my investment. Oh man I love that stuff . I'm a hands on investor like Peter Lynch.

 

[Route246]

Have you read Fast Food Nation (the book, not the movie)? Gives good insight as to how the industry works. In a nutshell, reduce training costs to zero due to high employee turnover, automate as much as possible reducing staffing and use robotics to handle mundane and redundant tasks so cooks become operators and food becomes an afterthought. (my editorial interpretation)

 

[karen1972]

I bought a ton of McDonalds in 2010 as a real estate investment play, McDonalds now owns about $40 Billion in real estate in the most prime locations in the world.

Mcdonalds tried to re-brand itself getting into the "fancy" burger market, driving up prices. It also spent a decent amount of money re-doing the stores to update them when then turned to McCafee types to try to steal Starbucks customers. I'm not sure either of those is really working for them. Menus became too complex, longer wait times, etc.

They need to pick a lane and stay there. People go to McDonalds for cheap fast food. I believe they think that too which is why they introduced the new restaurant spin-off CosMcs which will focus on drinks plus snacks, small menu fast service.

Maybe by splitting those two different types of customers they will be able to make both types of restaurants more efficient, keeping prices that will drive volume.

So I'm on the fence if this will work. I'm just holding at the moment.

 

[MichealKnight]

Had to repeat it

I bought a ton of McDonalds in 2010 as a real estate investment play, McDonalds now owns about $40 Billion in real estate in the most prime locations in the world.

Mcdonalds tried to re-brand itself getting into the "fancy" burger market, driving up prices. It also spent a decent amount of money re-doing the stores to update them when then turned to McCafee types to try to steal Starbucks customers. I'm not sure either of those is really working for them. Menus became too complex, longer wait times, etc.

They need to pick a lane and stay there. People go to McDonalds for cheap fast food. I believe they think that too which is why they introduced the new restaurant spin-off CosMcs which will focus on drinks plus snacks, small menu fast service.

Maybe by splitting those two different types of customers they will be able to make both types of restaurants more efficient, keeping prices that will drive volume.

So I'm on the fence if this will work. I'm just holding at the moment.

I'm on the fence too. Do people who might not go to MCD -- all of a sudden feel it's ok to go to CosMcs - when they know it's McD. Part of me thinks NO but I have to believe they've tested this out. And there is some evidence in other industries - people who won't buy a Chevy, at times buy a GM Cadillac -etc etc etc.

I so agree with you on staying in their lane. So many times they try to please people - who just aren't going to be satisfied because it's just not their jam.

That being said, I am still slightly concerned about pricing power. Is this a price war starting in fast food....OR is it just each chain with slightly better loss leaders or specials than before. As a customer - love the specials But my kid's future college fund says to hold the line on pricing.

 

[karen1972]

CosMcs may have a market. There are certainly people that dont' care where they get their drinks from as long as they taste good and its fast in/out. Honestly I'm one of those people. Usually I'm more thirsty than hungry when driving around.

As for price wars, I think its more a backlash response than a price war. Social media has been pounding fast food lately over what is deemed insane pricing. I don't eat there but if hashbrowns are now $3 as they say, thats a problem when everyone knows they use to be 2/$1. Last I saw they were $1.29 which is ok, I can justify that, but $3 for a fraction of a potato, um NO even I think that is corporate greed.

 

[Quattro73]

MCD’s app supposedly gives much better deals than the competition. FYI

MCD has been an interesting stock. REIT characteristics with a Brand that is invaluable and lots of international exposure.
It has been a very interesting diversifier.

Try back testing this:
VTSMX - Total Stock Market - 35%
VFISX - Short term Treasury - 15%
TLT - Long-term Treasury - 15%
GLD - Gold - 15%
MCD - 10%
XOM (Exxon) - 10%.

“Secret Sauce Portfolio” - Ultimate risk parity portfolio. Survived 2008, 2018, 2020, 2022 downturns surprisingly well.

Whoops up on Permanent Portfolio, and Golden Butterflies

 

[MichealKnight]

CosMcs may have a market. There are certainly people that dont' care where they get their drinks from as long as they taste good and its fast in/out. Honestly I'm one of those people. Usually I'm more thirsty than hungry when driving around.

As for price wars, I think its more a backlash response than a price war. Social media has been pounding fast food lately over what is deemed insane pricing. I don't eat there but if hashbrowns are now $3 as they say, thats a problem when everyone knows they use to be 2/$1. Last I saw they were $1.29 which is ok, I can justify that, but $3 for a fraction of a potato, um NO even I think that is corporate greed.

****

I too - feel it. $2.99 for large fries. At Burger King - the soda prices (3.49 for medium) is tough.

BUT - as an investor - the shellacking on social media, possibly tamping down on "corporate greed" - -- doesn't that mean my profit margins - or the the more socially acceptable way to say that... "Earnings Growth" is tougher to maintain? IF input costs haven't come down - and if that $3 hash brown goes to $1 - as a shareholder am I not making less?

 

[TheCaptain67]

IF input costs haven't come down - and if that $3 hash brown goes to $1 - as a shareholder am I not making less?

Per item sure you are making less. I however no longer buy hash browns when visiting McDonalds due to the new prices. Remains to be seen how the overall population feels, which would determine overall if McDs loses money on the sky high hash brown price…..

I buy frozen hash brown patties from Lidl now and cook in the air fryer - $0.35 each

 

[Andre1969]

I have some MCD shares. According to Schwab, I'm up about 165%, using current value compared to the cost basis. However, I forget how long I've had it now, and I've bought and sold a bit from time to time, as prices have risen and fallen.

According to the 5-year graph, it's up 49.66%. So not bad, but there are more profitable things to invest in. Of course, that doesn't count the dividend. It's currently around 2.36%, but that's better than nothing, and adds up over time. Back when I first bought it though, I can remember the dividend being more like 5% or more.

 

[GrayHare]

I can see the logic for fresh price competition now that new restaurants are (re)opening post covid. MCD is the top-run of the burger joints, so IMO sell the stock only if you see something better to do with the money.

 

[MichealKnight]

Price War Article in Barrons

https://www.barrons.com/articles/mc...price-inflation-f0a165e0?mod=hp_DAY_Theme_2_3

"Fast-Food Companies Could Be Heading Toward a Price War. Why McDonald’s Could Win."