Financial Analysis

Description of Business:
With 35429 restaurants in 119 countries and 60 million customers daily visiting their restaurants,
McDonalds is rightly claimed the largest fast food chain of the world (CNN, 2013). McDonalds
not just operates its own restaurants but also franchises and licenses it as well. McDonalds has
franchised or licensed a total of 28691 restaurants and operates 6738 restaurants (Datamonitor,
2013). The revenue is thus generated by its own operated restaurants as well the fees received
from its franchised restaurants. McDonalds franchise and license are usually granted on 20 years
term (McDonalds, 2013). The business operations have been segmented on the basis of different
geographical locations i.e. US, Europe, Canada, Latin America and APMEA consisting
Asia/Pacific, Middle East and Africa. US segment generates 31% of the annual revenue on
average whereas Europe and APMEA accounts for 40% and 23% of the revenues respectively
(McDonalds, 2013). UK, France, Germany and Russia are the biggest source of revenue
generation in Europe i.e. 67% of the revenues along with China, Australia and Japan accounting
for 54% of the revenue in APMEA (McDonalds, 2013). These seven markets together generate
75% of the total annual revenue for McDonalds and are thus referred to as major markets
(McDonalds, 2013).

Burger King Worldwide, on the other hand, has a total of 13667 restaurants in 97 countries
around the world. 13615 restaurants are franchised and 52 are operated by the company itself
(Burger King, 2013). The business operations cover four major geographical segments i.e. 1) US
and Canada, 2) Europe, Middle East and Africa (EMEA), 3) Latin America and Caribbean
(LAC) and 4) Asia Pacific (APAC) (Burger King, 2013).

Revenue Analysis:

(Amount in $ Million)
McDonalds Burger King Wordwide
2011 2012 2013 2011 2012 2013
 Revenue 27,006 27,567 28,105.7 2,339.9 1,970. 1,146.3
9

Revenues for McDonalds have been increasing over the recent three years i.e. from 2011 to
2013. The revenues increased by 2% in 2012 and by 1.95% in 2013. If the revenue is analyzed
basing on the geographical segments just mentioned before, US contributed $8529 in 2011,
$8814 in 2012 and $8851 in 2013 of the total revenue for McDonalds (McDonalds, 2012 and
2013). Thus there has been 3.3% and 0.4% upward trend in the US market for 2012 and 2013
respectively. The revenues increased in 2012 mainly because of the positive comparable sales.
Revenues could not increase in 2013 per expectations of the company and there was just a
negligible increase in revenue mainly because the expansion and reimaging program of 700
restaurants in US did not fetch positive results, coupled with negative comparable sales
(McDonalds, 2013). Europe fetched $10886 of revenues in 2011, $10827 in 2012 and $11300 in
2013. Thus revenues for Europe slightly decreased by 0.54% in 2012 and increased by 4.4% in
2013. The decline in Europes revenue for 2012 is attributed to weaker Euro and other
currencies, whereas the increase in revenue for 2013 is caused by positive sales in UK and
Russia and a stronger currency conversion of Euro partially offset by sales in Germany
(McDonalds, 2013). Revenues for APMEA have been $6019 in 2011, $6391 and $6477 in 2012
and 2013 respectively (McDonalds, 2013) thus increasing by 6.2% in 2012 and 1.4% in 2013.
Increase in revenue for 2012 is attributed to positive sales in China and Australia as well as
positive response from the customers to expansion program with 275 new restaurants opening in
China (McDonalds, 2013). Slight increase of 1.4% in 2013 is attributed to positive comparable
sales partially offset by the negative impact of foreign currency translation due to weaker
Australian Dollar and Japanese Yen as well as spread of Avian Influenza in China and other
APMEA regions (McDonalds, 2013).

Revenues for Burger King Worldwide, on the other hand, is seen declining over the three years in
consideration. The revenues declined by 16% in 2012 and 42% in 2013. Revenues based on
geographical segmentation reveals that revenues for all the segments declined from 2011 to 2013
less a slight increase of revenue amounting $6.3 million for Latin American and Caribbean
segment in 2012. The decrease in revenue is attributed to economic slowdown, inflation, rising
interest rates and increased unemployment adversely affected the revenues for the company due
to a decreasing consumer spending trend for restaurant dining occasions (Burger King, 2013).

Revenue Generation
27006 27567 28105
30000

25000
McDonalds
20000
Burger King
15000

10000
2339.9 1970.9
5000 1146.3

0
2011 2012 2013

Liquidity Ratios: Liquidity ratios, as the name implies, points to the ability and ease of
the company to liquidate itself should there be a need.

Current Ratio:

(Amount in $ Million)

McDonalds Burger King Worldwide

2011 2012 2013 2011 2012 2013
Current Assets 4403 4922.1 5050.1 724.1 890.5 1074.4

Current Liabilities 3509.2 3403.1 3170 472.2 397 346

Current Ratio 1.25 1.45 1.59 1.53 2.24 3.11

Current ratio is the ability of the company to meet its current liabilities with its current assets.
Current ratio for McDonalds in 2011-13 can be seen rising from being 1.25 in 2011 to being
1.59 in 2013. The ratio has increased by 16% in 2012 because the current assets increased by
11.7% against a 3% decline in the current liabilities. The rise in current assets for 2012 is due to
$473 million increase in the prepaid expenses mainly due to derivative contracts of $256.1
million indexed to companys stock and market indices, included in the prepaid expenses for
2012 in an effort to hedge market driven changes (McDonalds, 2013). Current assets increased
by 2.6% in 2013 whereas the current liabilities further decreased by 6.8% thus there has been an
increase in current ratio by 9.6% in 2013. Increase in current assets for 2013 is due to $463
million increase in cash/cash equivalents which was required to repay $535 million debt
obligations in January 2014 (Datamonitor, 2013). The current ratio for Burger King is also
climbing @ 46.4% in 2012 and 38.8% in 2013 mainly because the current assets increased by
48% against decline in its current liabilities by 27% from 2011 through 2013. Current ratio for
Burger King is therefore better off compared to McDonalds.

Current Ratio

3.5 3.11

3
2.24
2.5 McDonalds
2 1.53 1.59 Burger King
1.45
1.25
1.5
1
0.5
0
2011 2012 2013

Quick Ratio:

(Amount in $ Million)

McDonalds Burger King Worldwide

2011 2012 2013 2011 2012 2013
Current Assets 4403 4922.1 5050.1 724.1 890.5 1074.4

Inventory 116.8 121.7 123.7 13.7 6.7 1.2

Prepaid Expenses 615.8 1089 807.9 55.5 84.6 68.6

Current Liabilities 3509.2 3403.1 3170 472.2 397 346

Quick Ratio 1.04 1.09 1.29 1.38 2.01 2.9

The quick ratio, or more commonly referred to as acid test, is the ability of the company to
meet its current liabilities with its most current assets i.e. excluding inventory and prepaid
expenses etc. When the share of McDonalds lesser liquid assets is subtracted out of the current
assets, the quick ratio has declined to 1.04, 1.09 and 1.29 in 2011, 2012 and 2013 respectively.
The quick ratio has increased by 5% and 18.3% in 2012 and 2013 respectively due to an increase
in the inventories/prepaid expenses by 65% in 2012 and decrease by 23% in 2013. This 65%
increase in the prepaid expenses is attributed to hedging derivative contracts indexed to
companys stock and market indices (Research and Markets, 2013). Quick ratio can also be used
to measure this share of inventories etc. in the current assets of the company i.e. inventories and
prepaid expenses have been 16.6% of the current assets in 2011, 24.5% in 2012 and 18.4% in
2013. Quick ratio for Burger King has increased by 45.6% in 2012 and 44.2% in 2013. Quick
ratio for Burger King is better off when compared with McDonalds because the prepaid
expenses/inventory occupies just 9.5% of Burger Kings current assets in 2011, 10.25% in 2012
and 6.5% in 2013.

Quick Ratio
2.9
3

2.5 2.01
McDonalds
2
1.38 1.29 Burger King
1.5 1.04 1.09

0.5

0
2011 2012 2013

Turnover ratios
These ratios point to the ability of the company to turnover its assets and generating revenues out
of them.

Inventory Processing Period:

(Amount in $ Million)
 McDonalds Burger King Worldwide
2011 2012 2013 2011 2012 2013
Cost of Sales 7648.7 7845.2 7985.7 624.9 497.3 223

Average Inventory 113.35 119.25 122.70 13.70 10.20 3.95

Inventory Turnover 67.5 65.8 65 45.6 48.8 56.5

(times)
Inventory Processing 5.4 5.5 5.6 8 7.5 6.5
(days)
Inventory turnover points to the number of times inventory is turned over per business operating
cycle. On the other hand, inventory period indicates how many days inventory takes to be turned
over. Inventory turnover for McDonalds falls by 2.5% in 2012 as the cost of sales increased by
2.6% against an increase of inventory by 5.2%. Costs were negatively impacted in 2012 by
foreign currency translation of $97 million due to weaker Euro, low sales performance as well as
high labor charges in US and APMEA (McDonalds, 2013). The inventory turnover is further
pulled down by 1.2% in 2013 as the cost of sales increased by 1.8% whereas the average
inventory increased by 2.9%. A lower comparable sales performance and high commodity as
well as labor charges in 2013 particularly in US and APMEA, though partially offset by better
sales performance in Europe, affected the ability of the company to overcome cost pressure
(McDonalds, 2013). Inventory turnover for Burger King increases by 7% in 2012 as the cost of
sales decreased by 20.4% along with decline in inventory by 25.5%. The inventory turnover
further increased by 15.7% in 2013 as cost of sales decreased by 55% against fall of average
inventory by 61.2% in 2013.
 Inventory Processing
8
7.5
8
6.5
7 5.6
5.4 5.5
6 McDonalds
5 Burger King
4
3
2
1
0
2011 2012 2013

Assets Turnover Ratio:

(Amount in $ Million)

McDonalds Burger King Worldwide

2011 2012 2013 2011 2012 2013
Revenues 27,006 27,567 28,105.7 2,339.9 1,970.9 1,146.3

Average Assets 32482.5 34188.9 36006.4 5633.3 5586.2 5696.25

Assets Turnover 83.1 80.6 78 41.5 35.3 20

Assets turnover tells us about the ability of the business to generate sales on each dollar of assets,
an increasing trend in assets turnover is thus appropriate. McDonalds assets turnover declined
by 3% in 2012 as the revenues for the company increased by 2% yet the assets increased at a
higher pace of 5.2% which pulled down the assets turnover by 3%. The increase in total assets of
the company in 2012 is attributed to a significant increase in its prepaid expenses owing to the
derivative contracts of $256.1 million, as explained above, and $1.8 billion increase in its
property and equipment due to extensive expansion program of the McDonalds particularly in
US and China (Financial Times, 2012). In 2013, the assets turnover further declined by 3.2%
because the revenues increased at 2% against a higher increase of 5.3% in average assets. Total
assets for the company increased in 2013 due to significant increase in cash/equivalents required
to meet debt obligations arising in January 2014, and increase in its property and equipment
which makes up 70% of its total assets increasing by $1.1 billion primarily due to capital
expenditures (Morningstar, 2013). Assets turnover for Burger King, on the other hand, decreases
consistently by 14% in 2012 and then by a significant fall of 53% in 2013. This point to poor
utilization of assets by Burger King in generating its revenues and places McDonalds at a much
better position than Burger King as far as asset management is concerned.

Assets Turnover
83.1 80.6
90 78
80
70
McDonalds
60
41.5 Burger King
50 35.3
40
30 20
20
10
0
2011 2012 2013

Profitability Ratios: Profitability ratio tells about the profitability aspects as well as
management efficiency of the company and are therefore closely watched over by the internal
management.

Gross Profit Margin:

(Amount in $ Million)

McDonalds Burger King Worldwide

2011 2012 2013 2011 2012 2013
Gross Profit 19357.3 19721.8 20120 1715 1473.6 923.3

Revenues 27,006 27,567 28,105.7 2,339.9 1,970.9 1,146.3

Gross Profit Margin 71.6 71.5 71.5 73.3 74.8 80.5

Gross profit margin is a measure to tell about the percentage of revenues which have been
converted into gross profit after taking out the cost of sales. Gross profit margin for McDonalds
is seen maintaining itself at 71.5% in 2012 and 2013 though it slightly fell from 71.6% in 2011
due to the fact that the gross profit increased by 1.88% in 2012 against 2% increase in revenues
thus pulling down the gross profit margin slightly to 71.5%. Cost of sales have been 28.2% of
total revenue in 2011, 28.4% in 2012 and 28.4% in 2013. Increase in cost of sales is attributed to
higher commodity as well as labor cost in US and APMEA (CNN, 2013). The gross profit
margin for Burger King is on the rise consistently by 2% in 2012 and then by 7.6% in 2013. This
increase in margin can be attributed to efficient and most prudent use of its direct costs which
have been declining by 20% in 2012 and then by 55% in 2013 (Burger King, 2013). The decline
in revenues is attributed to the net refranchising of Company restaurants and unfavorable foreign
exchange cost whereas the cost of sales reduced due to lower food, paper and product costs
(Datamonitor, 2013).

Gross Profit Margin

80.5
82
80
78 McDonalds
74.8
76 73.3 Burger King
74 71.6 71.5 71.5
72
70
68
66
2011 2012 2013

Net Profit Margin:

(Amount in $ Million)

McDonalds Burger King Worldwide

2011 2012 2013 2011 2012 2013
Net Profit 5503.1 5464.8 5585.9 88.1 117.7 233.7

Revenues 27,006 27,567 28,105.7 2,339.9 1,970.9 1,146.3

Net Profit Margin 20.3 19.8 19.8 3.76 5.97 20.4

Net profit margin points to the share of net income in revenues and thus serves as a tool to
measure the earning shareholders should expect on their investment in the company. Net profit
margin for McDonalds falls by 2.5% in 2012 as the net income decreases by 0.7% against 2%
increase in the revenues. Decrease in the net income in 2012 is attributed to negative impact of
foreign currency translation, higher effective tax rates and increase in selling and administrative
expenses (Business Recorder, 2013). Effective tax rate increased by 1.1% in 2012 due to
reinstatement of certain tax benefits by the US government which had already expired in 2011
(McDonalds, 2013). Selling and administrative expenses increased by 3% in 2012 because of
higher wages of the employees as well as sponsorship of London Olympics and cost of holding
owners convention held worldwide (McDonalds, 2012). Net profit margin flattens at 19.8% in
2013 as the net income though increases at 2.2% yet offset by an equivalent 2% increase in the
revenues. Increase in the net income for 2013 is attributed to higher franchised margins as well
as lower administrative/selling expenses due to lower incentive based compensation (Business
Recorder, 2013). Net profit margin for Burger King increased by 59% in 2012 and then most
significantly by 241% in 2013. Net income increased in 2012 and 2013 due to higher comparable
sales, higher franchise and revenue on property as well as decrease in operating expenses i.e.
selling and administrative costs (Burger King, 2013).

Net Profit Margin

25
20.3 19.8 19.8 20.4
20
McDonalds
15 Burger King

10 5.97
3.76
5

0
2011 2012 2013

ROE:
 (Amount in $ Million)

McDonalds Burger King Worldwide

2011 2012 2013 2011 2012 2013
Net Profit 5503.1 5464.8 5585.9 88.1 117.7 233.7

Average Equity 14512 14842 15652 1049.2 1112.1 1345.6

ROE (%) 37.9 36.8 35.7 8.4 10.6 17.4

Return on equity helps equity holders know the rate of return they can expect on their investment
in the company. ROE for McDonalds declines progressively by 3% in 2012 as the net profit
decreases by 0.7% against equity increase of 2.3%. The ROE decreased in 2012 primarily
because of the negative impact of foreign currency translation on net income. The ROE further
falls down by 3% in 2013 as the net profit increases by 2.2% only to be offset by a higher
increase of 5.5% in equity. Decline in ROE for 2013 is attributed to lower growth in operating
results (BBC, 2013). ROE for Burger King, on the other hand, is climbing consistently by 26%
in 2012 and then by 64% in 2013 attributed to significant and consistent increase in its net
income (BBC, 2013).

ROE
37.9 36.8
40 35.7

35
30 McDonalds
25 Burger King
17.4
20
15 10.6
8.4
10
5
0
2011 2012 2013
Long Term Solvency Ratios: Long term solvency ratios determine the ratio held
between debt financing and equity. It also shows the capacity of an organization to pay long term
debt along with interest expenses on debts.

Debt to Equity Ratio:

(Amount in $ Million)

McDonalds Burger King Worldwide

2011 2012 2013 2011 2012 2013
Debt 12500 13633 14130 3010.3 2905.1 2880.2

Shareholders Equity 14390 15294 16010 1049.20 1175.00 1516.20

Debt to Equity (%) 86.8 89.1 88.2 286.9 247.2 190

Debt to equity ratio is a very important ratio that can limit potentials of future debts to company
as financial institutions/lenders closely monitor this ratio before approving any debt for the
company. The gearing ratio for the McDonalds deteriorates in 2012 by 2.6% as the debt increases
by 9.1% against an increase of 6% in its equity. The net increase in debt for 2012 is primarily
because of the net issuances of $1.2 billion (McDonalds, 2012). The company however still has
the authority to borrow $5.4 billion from financial institutions as well as $2 billion on account of
committed and uncommitted line of credit agreements (McDonalds, 2012). The ratio however
improves by 1% in 2013 due to an increase in debt by 3.6% and a higher increase of 4.7% in its
equity. Increase in debt for 2013 is attributed to $535 million net issuances (Datamonitor, 2013).
Moreover, 35% of the debt is denominated in foreign currency and thus exchange rate in
Australian dollar, Euro and British pound greatly affected the state of total debt in 2013
(Financial Times, 2013). The gearing ratio for Burger King is surprisingly higher in all the three
years. Higher debt is attributed to losses on early extinguishment of debts and debt refinancing
initiatives to refinance the borrowed amounts under previous credit agreements (Burger King,
2013).
 Debt to Equity
286.9
300 247.2
250
190
McDonalds
200
Burger King
150
86.8 89.1 88.2
100

50

0
2011 2012 2013

Interest coverage ratio:

(Amount in $ Million)

McDonalds Burger King Worldwide

2011 2012 2013 2011 2012 2013
Operating Profit 8529.7 8604.6 8764.3 362.5 417.7 522.2

Interest Expense 492.80 516.6 521.9 226.7 223.8 200

Tax Coverage 17.3 16.6 16.8 1.6 1.9 2.6

Interest coverage ratio points to the ability of the company to meet its interest liabilities out of
the operating profit. The coverage ability of McDonalds decreases by 4% in 2012 as the
operating income increases by 1% against 4.8% increase in its interest expense. Interest expense
increased by 5% in 2012 as the debt increased by 9.1% thus the increase in interest expense is
mainly due to higher debt balances. The coverage decreases 1.2% in 2013 as the operating
income increased by 1.9% with interest expense increasing by 1% due to increase in the debt by
3.6%, and is attributed to fluctuations in foreign currency exchange rates (Financial Times,
2013). The company uses major capital markets, terminating swaps as well as derivatives to
reduce its interest liabilities. The interest coverage ability of Burger King, on the other hand, is
much lesser than McDonalds with an increase of 18.8% and 36.9% in 2012 and 2013
respectively. The interest expense for Burger King reduced by 1.3% in 2012 and by 10.6% in
 2013 because the debt liability decreased by 3.5% and 1% in 2012 and 2013 respectively
(Business Recorder, 2013).

Interest Coverage
17.3 16.8
16.6
18
16
14
McDonalds
12
10 Burger King
8
6
2.6
4 1.6 1.9
2
0
2011 2012 2013

Business Context Analysis:

SWOT Analysis

Strengths
The company owns the largest percentage of the total sales of fast food all over the globe, with a
market capitalization of $101.1 billion (Datamonitor, 2013).
The company has a strong brand recognition and value around $40 billion (Euromonitor, 2013).
This is the most popular brand name in the fast food industry. The company's mascot; Ronald
McDonald, is also hugely popular.
The company partners with some of the biggest brands in the world, such as Coca Cola, Heinz
Ketchup, Dannon Yogurt etc.
As mentioned above, 80% of the McDonalds operations are run by independent franchises which
allow the company to meet localized food requirements and ingenious marketing campaigns.
The company targets children in its marketing campaigns from a very early age, ultimately
leading to increased consumer loyalty.
 Weaknesses
Over the past few years, the company has received a lot of negative publicity on account of being
unhealthy leading to obesity from a very early age (CNN, 2013).
The 'Mac Job' is seen as a very low paid and low skilled job, and as such isn't seen very
positively by employees (Morningstar, 2013). Ultimately, this leads to lower performance and an
increased employee turnover rate.
The company finds it difficult to differentiate itself from the numerous other fast food chains on
the market and the company opts to compete via setting very low price points.

Opportunities
The company can increase its sales by incorporating healthier food menus and items. This will
ultimately allow the company to not only increase its strengths, but also eliminate one of its
major weaknesses (CNN, 2013).
Change in consumer habits means that the business must open up new facets to meet those
needs. The company has already seen success with the McCafe, McStop and the McExpress, and
should introduce newer options that will allow it to truly tap in to a vast amount of untapped
consumers.

Threats
In most developed economies, the fast food industry is already so crowded that there's very little
space for the company to register any sort of growth (Financial Times, 2013).
The company faces a major threat from local fast food restaurants. Even though McDonald's
provides a number of localized food items on its menus, the amount of localized fast food chains,
which are run by natives are proving to be major competition.
A major portion of McDonald's income comes from foreign operations which means fluctuations
in currency exchange rates affects McDonalds profits. Because of the foreign currency rate
fluctuations, the overall profits in the year 2012 were significantly reduced (McDonalds, 2012).
The company also faces threat related to spread of diseases in the animals whose meat is being
used in their products. McDonalds already saw a decline in their revenues for 2013 in China and
other APMEA regions due to spread of Avian Influenza in poultry (McDonalds, 2013).

PESTEL Analysis:
Political Factors
There are a number of groups within the United States as well as Europe that have talked
publicly about the harmful effects of consuming fast junk foods, referring to increasing
cholesterol and the rising rates of obesity as reference (Research and Markets, 2013). Also,
changes in the tax rate/policy directly affect companies like McDonalds. As mentioned above,
US government increased the effective tax rate by 1.1% in 2012 due to reinstatement of certain
tax benefits which had already expired in 2011 and thus had a direct effect on McDonalds net
income (McDonalds, 2012).

Economic Factors
Whenever there's inflation within the economy where McDonalds franchises are based, the
companies/franchises faces negative trend in consumers spending and even offsets its low
priced strategy. Also, as mentioned above, McDonalds often finds it difficult to deal with the
changes in the exchange rates. The revenues were affected by weaker Euro in 2012 and due to
weaker Australian dollar and Japanese Yen in 2013 despite of derivative contracts to hedge the
market (McDonalds, 2012).

Cost of sales increases due to high labor charges. As mentioned above, the increase in cost of
sales in 2012 and 2013 in the business segments of US and APMEA affected the revenues
adversely (Datamonitor, 2013).

Social Factors
The company establishes a positive mindset for their core consumers by introducing newer
options. The company has given the world an array of different dining needs and different types
of meals. It was also noted that people who are just below the age of thirty five are the most
frequent consumers of the McDonald's franchises (Research and Markets, 2013).

The company carries out market research in order to determine any changes in the needs and
wants of the target consumers. The company makes use of consumer behavior and product
personality in order to turn the market to its advantage.

The food menus of the company are set to meet the needs of the local consumers. The company
introduces localized food items in numerous different cultures to meet the needs and the tastes of
the local people (BBC, 2013).
Technological Factors
McDonalds has been benefiting from advancements in technology and is evident not only in the
products they offer but also by visiting their website online which itself is multi facet. The
company spends huge amounts on television advertisements focusing mainly on the younger
generations and baby boomers (Research and Markets, 2103). Because of the significant
improvements within the supply chain of the company as well as the inventory management
system, the company is able to perform well in the international market.

Legal Factors
Legally, the company is robust, though it is facing a constant slew of lawsuits in relation to the
methods used by the company to manufacture its food products, and more importantly, the
number of health food activists that are growing who are blaming McDonalds for increasing
obesity all over. The company has however addressed this issue by offering a number of different
healthy products, such as salads as well as apples on the menu. The company has begun to
release nutritional data of the food items that it has on the menu, which allows the company to
justify its ingredients.

Environmental Factors
The company pays lot of attention to their responsibilities related to environmental degradation.
This is why they have introduced the use of non- biodegradable substances for the glasses/cups
they use in an effort to decreasing the overall pollution (McDonalds, 2013). The company also
went over the issue of the use of Styrofoam in detail within its operations in Hong Kong and
Australia, in an attempt to address the issue at hand (Euromonitor, 2103).

Conclusion and Recommendations:

McDonalds performance though can be seen higher than its competitor yet it needs to improve
upon a few of its facets to hold onto its market share which is threatened by its global
competitors as well as local fast food restaurants. Revenues are increasing but with declining
gross profit as well as net profit due to a host of factors mentioned above including the
increasing cost of sales, employees high turnover rate as well as fluctuations in exchange rates
etc. Following suggestions are proffered to increase its business performance in the segments it
operates:
 McDonalds should incorporate use of healthier oil and foods on its menu i.e. fresh fruits
and vegetables as well as avoid using additives and preservatives.
High turnover rate of its employees can aggravate issues for McDonalds and thus
immediately needs to work on reducing it by offering attractive incentives and salary.
Cost of sales as well as operating expenses for McDonalds have been increasing over
years. McDonalds should therefore work on reducing its direct as well as indirect costs
which will help further lower its product prices and fetch extra market share.