From Nanalyze:
We spend the vast majority of our waking hours trying to figure out the best way to invest in disruptive technologies, but that’s not where we actually allocate the lion’s share of our investments. Instead, our hard-earned dollars can be found in boring industries like insurance or consumer goods which are more likely to provide predictable cash flows in the form of dividends that grow slowly over time. It’s probably the “safest” way we’ve seen to invest in equities, provided that you diversify across industries and hold a large enough number of stocks for diversification. Additionally, we like to invest in large multinational firms to avoid being over-reliant on those crazy Yanks.
Speaking of which, one thing you’ll see in Yankee land is a whole lot of overweight people. At least that’s what one of our Danish MBAs remarked as he experienced a McDonald’s (MCD) drive-through for the very first time in his life. In Denmark, they don’t have drive-throughs, and they’re also crazy enough to believe that big isn’t beautiful, it’s unhealthy. Denmark has a total of 88 McDonald’s outlets, less than 0.02% of the 37,404 total Mickey D’s restaurants that can be found occupying some of the most prime real estate in 120 countries around the world. All those restaurants have collectively helped McDonald’s pay dividends every single year for 42 years, each year more than the last. So how can McDonald’s continue to grow those payments moving forward? Well, they can increase sales or decrease costs.
Increasing Sales or Decreasing Costs?
When it comes to increasing sales, that might come from entering new markets like Kenya, being more clever with advertising spend, or developing new food products to increase sales (think all day breakfasts). When it comes to decreasing costs, the biggest bang for the buck appears to be reducing labor costs. At least that’s the case for franchised McDonald’s restaurants where labor is the biggest expense at 24% of net sales:
McDonald’s Franchise Income Statement
The above numbers were taken from a firm called Janney Capital markets, and we can’t confirm the accuracy of the data nor the date it was published. Still, let’s assume employing humans amounts to 24% of costs. Then, add to that the whole minimum wage debate about paying workers $15 an hour, something that a previous McDonald’s executive said would result in “a job loss like you can’t believe“. This, of course, led to some rumors that McDonald’s may decrease costs by adopting the type of robotics technology we talked about before in our article on A High-Tech Burger Joint of the Future:......MUCH MORE
