McDonalds 2008 Annual Report Download - page 32

U.S. Europe
Dollars in millions 2008 2007 2006 2008 2007 2006
As reported
Number of Company-operated
restaurants at year end 1,782 2,090 2,104 2,024 2,177 2,253
Sales by Company-operated restaurants $4,636 $4,682 $4,410 $ 7,424 $ 6,817 $ 5,885
Company-operated margin $ 856 $ 876 $ 843 $ 1,340 $ 1,205 $ 960
Store operating margin
Company-operated margin $ 856 $ 876 $ 843 $ 1,340 $ 1,205 $ 960
Plus:
Outside rent expense(1) 74 82 82 254 248 229
Depreciation – buildings &
leasehold improvements(1) 70 78 74 110 107 98
Less:
Rent & royalties(2) (684) (691) (651) (1,435) (1,294) (1,099)
Store operating margin $ 316 $ 345 $ 348 $ 269 $ 266 $ 188
Brand/real estate margin
Rent & royalties(2) $ 684 $ 691 $ 651 $ 1,435 $ 1,294 $ 1,099
Less:
Outside rent expense(1) (74) (82) (82) (254) (248) (229)
Depreciation – buildings &
leasehold improvements(1) (70) (78) (74) (110) (107) (98)
Brand/real estate margin $ 540 $ 531 $ 495 $ 1,071 $ 939 $ 772
(1) Represents certain costs recorded as occupancy & other operating expenses on the Consolidated statement of income – rent payable by McDonald’s to third parties on leased sites and
depreciation for buildings and leasehold improvements. This adjustment is made to reflect these occupancy costs in Brand/real estate margin. The relative percentage of sites that are
owned versus leased varies by country.
(2) Reflects average Company–operated rent and royalties (as a percentage of 2008 sales: U.S. – 14.8% and Europe – 19.3%). This adjustment is made to reflect expense in Store
operating margin and income in Brand/real estate margin. Countries within Europe have varying economic profiles and a wide range of rent and royalty rates as a percentage of sales.
Selling, general & administrative expenses
Consolidated selling, general & administrative expenses were flat (decreased 1% in constant currencies) in 2008 and increased 3% (flat
in constant currencies) in 2007. The 2008 constant currency change benefited by 3 percentage points due to the 2007 Latam trans-
action. In 2008, expenses included costs related to the Beijing Summer Olympics and the Company’s biennial Worldwide Owner/
Operator Convention. In 2007, higher employee-related costs were offset by a reduction in costs due to the Latam transaction.
Selling, general & administrative expenses
Amount Increase/(decrease)
Increase/(decrease)
excluding currency
translation
Dollars in millions 2008 2007 2006 2008 2007 2008 2007
U.S. $ 745 $ 744 $ 727 —% 2%—%2%
Europe 714 689 610 413 14
APMEA 300 276 238 916 811
Other Countries & Corporate(1) 596 658 721 (9) (9) (9) (10)
Total $2,355 $2,367 $2,296 —% 3% (1)% —%
(1) Included in Other Countries & Corporate are home office support costs in areas such as facilities, finance, human resources, information technology, legal, marketing, restaurant oper-
ations, supply chain and training.
Selling, general & administrative expenses as a percent of revenues were 10.0% in 2008 compared with 10.4% in 2007 and 11.0%
in 2006. Selling, general & administrative expenses as a percent of Systemwide sales were 3.3% in 2008 compared with 3.7% in 2007
and 4.0% in 2006. Management believes that analyzing selling, general & administrative expenses as a percent of Systemwide sales, as
well as revenues, is meaningful because these costs are incurred to support Systemwide restaurants.
30 McDonald’s Corporation Annual Report 2008