McDonald's growth plans for Russia and Europe
The company will use half of its 2012 capital expenditure for renovating its restaurants around the world.
McDonald's competes with Yum! Brands (YUM), Subway, Starbucks (SBUX), Wendy's (WEN), Chipotle Mexican Grill (CMG), among many others.
More than 80% of McDonald's restaurants are franchised worldwide. But in countries such as China and Russia there is a paucity of franchisers and hence the company primarily expanded through self-operated stores.
Moreover, lax legal systems in these countries means the company has to be extra cautious about legal agreements with the franchisers. In China, too, the company has indicated its intention to expand through franchising. Currently, only 36 out of its 1,400 restaurants in China are franchised.
Franchising is a low investment, high margin business compared to company-operated stores. Apart from McDonald's, most big fast food players such as Burger King and Subway are looking to expand into Russia where consumers spending is growing due to rising incomes.
Europe to follow U.S.'s suit?
In our recent article, we talked about how McDonald's continues to attract an even greater number of consumers in the U.S. by continually expanding the menu and refurbishing its existing restaurants in order to make them appear more upscale and offer customers a better overall dining experience.
Until Q1 2012, McDonald's re-imaged the interior of 80% of its restaurants in Europe and the exterior of 50% of them. Moreover, McCafe will be extended to 150 more restaurants.
Overall, McDonald's expects to incur an expense of $2.8 billion on capital expenditure in 2012 with half of the amount to be used for renovating its restaurants around the world.
We have a Trefis price estimate of $99 for McDonald's, which is about 2% above the current market price.
More Trefis Stories:
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
These companies won't soar like other plays in the sector, but they make for great income sources.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.