McDonalds 2012 Annual Report Download - page 22

While we believe that the following information provides a
perspective in evaluating our Company-operated business, it is
not intended as a measure of our operating performance or as an
alternative to operating income or restaurant margins as reported
by the Company in accordance with accounting principles gen-
erally accepted in the U.S. In particular, as noted previously, we
do not allocate selling, general and administrative expenses to
our Company-operated business. However, we believe that about
$50,000 per restaurant, on average, is the typical cost to support
this business in the U.S. The actual costs in markets outside the
U.S. will vary depending on local circumstances and the organiza-
tional structure of the market. These costs reflect the indirect
services we believe are necessary to provide the appropriate
support of the restaurant.
U.S. Europe
Dollars in millions 2012 2011 2010 2012 2011 2010
As reported
Number of Company-operated restaurants at
year end 1,552 1,552 1,550 2,017 1,985 2,005
Sales by Company-operated restaurants $4,530 $4,433 $4,229 $ 7,850 $ 7,852 $ 6,932
Company-operated margin $ 883 $ 914 $ 902 $ 1,501 $ 1,514 $ 1,373
Store operating margin
Company-operated margin $ 883 $ 914 $ 902 $ 1,501 $ 1,514 $ 1,373
Plus:
Outside rent expense(1) 59 56 60 245 242 223
Depreciation—buildings & leasehold
improvements(1) 77 69 65 123 118 105
Less:
Rent & royalties(2) (668) (651) (619) (1,603) (1,598) (1,409)
Store operating margin $ 351 $ 388 $ 408 $ 266 $ 276 $ 292
Brand/real estate margin
Rent & royalties(2) $ 668 $ 651 $ 619 $ 1,603 $ 1,598 $ 1,409
Less:
Outside rent expense(1) (59) (56) (60) (245) (242) (223)
Depreciation—buildings & leasehold
improvements(1) (77) (69) (65) (123) (118) (105)
Brand/real estate margin $ 532 $ 526 $ 494 $ 1,235 $ 1,238 $ 1,081
(1) Represents certain costs recorded as occupancy & other operating expenses in 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 percent of sales: U.S.: 2012 – 14.7%; 2011 – 14.7%; 2010 – 14.6%; Europe: 2012 – 20.4%; 2011 – 20.4%; 2010 –
20.3%). 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 and administrative expenses increased 3% (4% in constant currencies) in 2012 and increased 3% (flat in
constant currencies) in 2011. The growth rate for 2012 was primarily due to higher employee costs, the 2012 London Olympics
sponsorship, higher technology related costs and the 2012 Worldwide Owner/Operator Convention, partly offset by lower incentive-
based compensation. The growth rate for 2011 was flat as higher employee and other costs were offset by lower incentive-based
compensation and costs in 2010 related to the Vancouver Olympics and the Company’s 2010 Worldwide Owner/Operator Convention.
Selling, general & administrative expenses
Amount Increase/(decrease)
Increase/(decrease)
excluding currency
translation
Dollars in millions 2012 2011 2010 2012 2011 2012 2011
U.S. $ 782 $ 779 $ 781 0% 0% 0% 0%
Europe 695 699 653 (1) 752
APMEA 353 341 306 412 35
Other Countries & Corporate(1) 625 575 593 9(3) 9(4)
Total $2,455 $2,394 $2,333 3% 3% 4% 0%
(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.
20 McDonald’s Corporation 2012 Annual Report