McDonald's Won't Spin Off Real-Estate Holdings
On the heels of its first strong quarter in two years, McDonald’s said at its Nov. 10 investor conference in New York that it will accelerate cost cuts and boost sales of restaurants to franchisees. But CEO Steve Easterbrook put to rest speculation that the Oak Brook, Ill., chain would spin off its real-estate holdings in the U.S.
Despite urging from some investors, Easterbrook said the chain determined a real-estate investment trust (REIT) would be too risky to its business model, which relies on rental income from franchisees for a big portion of its revenues. He emphasized that McDonald’s turnaround effort is focused on improving the operations of its restaurants, efforts which appear to be paying off. In its third quarter, McDonald’s posted its first quarterly increase in U.S. same-store sales since the fourth quarter of 2012.
The company also boosted the number of restaurants it plans to sell to franchisees to 4,000—from its earlier target of 3,500—by the end of 2018. McDonald's, which is currently 81% franchisee-owned, will become 93% franchisee-owned by that time.