Jan 19, 2019 | Updated: 08:24 AM EST

McDonald's Properties Are Off The REIT

Nov 12, 2015 10:58 PM EST


Last Tuesday, in their company investor's meeting, McDonald's Chief Executive Steve Easterbrook clarified that the company will not be engaging or spinning off their properties into a REIT or real estate investment trust, as their investors had suggested for increasing the company's profit. As Mr. Easterbrook said that the move on opening its stock in real estate would be rather risky for the company, as its value increases year after year.

Real estate investment trust or REIT spin off provides a way for companies to unlock the value of their real estates, which were being overlooked when under or being overseen by a certain company. It basically separates the real estate from the mother company, operating and standing on its own as a business.

McDonald's has been one of the biggest food companies currently, with stock trading and franchise shares. Upon the review with its United States locations, of the 8,000 stores located nationwide, 6,000 are leased and may not be as favorable to investors as would be expected. Its main profit comes from franchise rents, one of the main points why engaging in REIT is considered risky for the venture. "Our conclusion is that we don't believe it serves the best interests of shareholders to pursue a REIT at this time," he pointed out. "The potential upside isn't compelling and the future value at risk too great."

As the executive share holders find ways to generate more income for the company, such as improving the menu and restaurant renovations and the much criticized all-day breakfast in the United States that was launched on Oct. 6 and has been going well, which as the McDonald's USA's President Mike Andres said, "All-day breakfast will be our next growth platform." As for now, McDonald's aims for the restaurant sales to go up to 3 to 5 percent and operating income to 5 to 7 percent.

©2017 ScienceTimes.com All rights reserved. Do not reproduce without permission. The window to the world of science times.
Real Time Analytics