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In 2005 McDonald's net profit margin was ~12%, today it's ~30+%. Obviously that doesn't account for the entire price increase and wouldn't make that much of a d

In 2005 McDonald's net profit margin was ~12%, today it's ~30+%. Obviously that doesn't account for the entire price increase and wouldn't make that much of a difference...but worth noting.

twoodfin 11mo ago
Yes, they have progressively become a higher-margin business, which necessitates moving up market to consumers who will pay those margins.
- ta12653421 11mo ago
  10 USD is still the magic barrier, Id say?
- venturecruelty 11mo ago
  Why do you _have_ to extract more money out of people just because you can? Is it truly not enough for the McDonald's executives?
  - twoodfin 11mo ago
    No, it’s extracting more money out of different people. Because they’re a more profitable target for investment than the former people.
  - nielsbot 11mo ago
    Their function is to maximize profit. I doubt they think about their company's position in society often if at all. But there are many factors. Allowing stock buybacks is definitely one of those. If I'm reading this chart right they're spending about $500M/quarter on buybacks? https://www.financecharts.com/stocks/MCD/cash-flow/repurchase-of-capital-stock https://www.financecharts.com/stocks/MCD/cash-flow/repurchas...
  - red-iron-pine 11mo ago
    publicly traded company, the stock price must go up. always. and it's not the executives, it's the owners. those on the board, or who own a ton of shares. stock price doesn't go up and those execs get replaced until they find someone who will.
lvl155 11mo ago
It’s because their cogs is basically same. They are vertically integrated.
pjfin123 11mo ago
I'm not sure where this number comes from but McDonald's profit margins may be misleading due to their franchise and real estate based model. If you spend $10 at McDonald's that's paid to the franchise and the central McDonald's corporation isn't necessarily profiting $3.
quickthrowman 11mo ago
McDonalds business model is to own real estate and lease it to franchisees, and to sell those franchisees supplies to make hamburgers and fries so they can pay the rent. It’s a commercial real estate company with extra steps, not a restaurant company. Once you understand that, McDonalds net margins are easier to understand. Google ‘McDonalds real estate’ for a longer write up about the business model of McDonalds
- deleted 11mo ago
  [deleted]

In 2005 McDonald's net profit margin was ~12%, today it's ~30+%. Obviously that doesn't account for the entire price increase and wouldn't make that much of a difference...but worth noting.

twoodfin 11mo ago

Yes, they have progressively become a higher-margin business, which necessitates moving up market to consumers who will pay those margins.

ta12653421 11mo ago
10 USD is still the magic barrier, Id say?
venturecruelty 11mo ago
Why do you _have_ to extract more money out of people just because you can? Is it truly not enough for the McDonald's executives?
- twoodfin 11mo ago
  No, it’s extracting more money out of different people. Because they’re a more profitable target for investment than the former people.
- nielsbot 11mo ago
  Their function is to maximize profit. I doubt they think about their company's position in society often if at all. But there are many factors. Allowing stock buybacks is definitely one of those. If I'm reading this chart right they're spending about $500M/quarter on buybacks? https://www.financecharts.com/stocks/MCD/cash-flow/repurchase-of-capital-stock https://www.financecharts.com/stocks/MCD/cash-flow/repurchas...
- red-iron-pine 11mo ago
  publicly traded company, the stock price must go up. always. and it's not the executives, it's the owners. those on the board, or who own a ton of shares. stock price doesn't go up and those execs get replaced until they find someone who will.

lvl155 11mo ago

It’s because their cogs is basically same. They are vertically integrated.

pjfin123 11mo ago

I'm not sure where this number comes from but McDonald's profit margins may be misleading due to their franchise and real estate based model. If you spend $10 at McDonald's that's paid to the franchise and the central McDonald's corporation isn't necessarily profiting $3.

quickthrowman 11mo ago

McDonalds business model is to own real estate and lease it to franchisees, and to sell those franchisees supplies to make hamburgers and fries so they can pay the rent. It’s a commercial real estate company with extra steps, not a restaurant company. Once you understand that, McDonalds net margins are easier to understand. Google ‘McDonalds real estate’ for a longer write up about the business model of McDonalds

deleted 11mo ago
[deleted]