McDonald's released their statement that they are not planning on to have a real estate investment trust or REIT despite of expectations from some of its shareholders.
According to money.cnn.com, Howard Penney, a restaurant analyst at Hedgeye said many of McDonald's shareholders want to form a REIT as it can cut down the company's tax liability by $1 billion. However, this possibility caused worry on franchise owners as they fear that they might lose control over of the physical stores that they are operating.
McDonald's CEO Steve Easterbrook reiterated that franchise- operated branches play a big part of the company's success. He hopes that 95% of McDonald's stores will be "independently operated."
Up to this date, McDonald's has branches in 36,000 locations across more than a hundred countries and is at 80% of franchise- operated stores.
The company has been struggling with its sales for the past year but when Easterbrook took office as CEO last March, he had taken different steps in increasing the company's sales. His work paid as the company's sale registered an increase in their sales "for the first time in more than a year."
It has been a roller coaster ride for the company as it "plans to boost dividends and stock buybacks in order to return more cash to shareholders." However, it will make the company incur a debt of $10 billion which resulted to Standard & Poor's to lower the credit rating of the company. Despite of this, stockholders remained confident with McDonald's as its stock barely changed even after the announcement.
In a report by wsj.com, McDonald's is planning to sell additional 4,000 franchise stores by 2018, from its previous plan of 3,500. Investors favor franchising as "it reduces costs and volatility."
Also, franchising can cut their general- and- administrative cost by $500 million once the additional franchise stores are sold by 2018. For 2014, the company has incurred an almost $2.5 billion expenses in selling, administrative and general costs.
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