McDonalds 2000 Annual Report Download - page 28

McDonald’s is well positioned to benefit from the
world’s growing population and the enduring needs
and desires of people for great-tasting food, value
and convenience.
Global growth opportunities. There are
enormous opportunities for McDonald’s around the
world. In the U.S., we have 13,000 McDonald’s
restaurants serving a population of nearly 300 million people, and
we continue to grow sales at existing restaurants and add new
restaurants. In Europe, the population is more than twice as large
as the U.S., and we operate 5,500 McDonald’s restaurants. In
Asia/Pacific, where more than 60 percent of the world’s population
lives, we have 6,200 McDonald’s. And in Latin America, where we
operate only 1,500 restaurants, the strong family culture, young
demographics and large population align well with McDonald’s
offerings.
Brand. The McDonald’s brand is one of the most well-known and
recognized brands in the world. It stands for Big Mac, Chicken
McNuggets and Happy Meals...PlayPlaces and Ronald McDonald...
quick service, cleanliness, value and convenience. The brand is also
respected because of the McDonald’s System’s commitment to local
communities and to adhering to the highest safety standards.
Competitive strengths. McDonald’s is a leader in the global
food service industry. We serve 45 million customers every day in
29,000 restaurants in 120 countries around the world. We are part
of customers’ everyday lives, and we have the leading market posi-
tion in virtually every market in which we operate.
Our global supply infrastructure is unparalleled and allows us to
achieve economies of scale and offer great value to customers.
Our core competencies include operations, menu management,
marketing and real estate. We have talented local management and
staff who understand their customers and can quickly adapt to
changing market dynamics.
We have the best franchisees in the world. Their entrepreneurial
spirit, collaboration, enthusiasm and expertise continue to drive our
business today.
Social responsibility. McDonald’s has been recognized as a
leader in this area. Our efforts encompass support of educational
programs and Ronald McDonald House Charities, environmental
and animal welfare initiatives, and local community
involvement.
Strong cash flow. Over the last three years,
McDonald’s cash from operations totaled $8.5 bil-
lion. We use our cash flow primarily to invest in our
growing business. We invested $5.7 billion in capi-
tal expenditures over the last three years, resulting
in free cash flow of $2.8 billion.
Efficient use of capital. Our first priority is to invest in Brand
McDonald’s by adding restaurants and investing in sales-building
initiatives. We earn a superior return on these investments both by
operating restaurants and by receiving rents and service fees under
our franchise agreements.
Our second priority is to grow our other restaurant concepts to
capture those meal occasions that McDonald’s cannot optimize.
To do so, we have invested in Aroma Café, Boston Market, Chipotle
Mexican Grill, Donatos Pizza and Pret A Manger.
With our free cash flow and credit capacity, we repurchase
shares and pay dividends to enhance shareholder value. Over the
past 10 years, we purchased $7.1 billion or 301 million shares of our
stock and paid $2 billion in common dividends.
Financial performance. We continue to achieve returns in
excess of our cost of capital, and our objective is to increase returns
over time. In certain markets, where we are investing for the future,
it will take a while to achieve such returns. Yet, in many established
markets, we are achieving excellent returns, approaching or exceed-
ing 20 percent. In 2000, our consolidated return on assets was
15.9 percent.
McDonald’s business has grown steadily over the past 10 years,
and our plan is to continue to do so. Our Systemwide sales and
earnings per share increased 7.9 percent and 10.5 percent, respec-
tively, on a compound annual basis over the last 10 years.
As a shareholder, I am excited about McDonald’s future because of
the System’s many strengths and the opportunities I see ahead.
Michael L. Conley
Executive Vice President, Chief Financial Officer
March 8, 2001
CFO review: Why I believe McDonald’s is
a good investment today
26 CFO review
We continue to
achieve returns in
excess of our cost
of capital, and our
objective is to
increase returns
over time.