McDonald's to make more cost cuts in the near future - Insane Visions

McDonald’s to make more cost cuts in the near future

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One of the biggest restaurant chains in the world is planning some major changes, as a part of their new turnaround plans. We’re talking about McDonald’s and their plans to increase general and administrative cuts to $500 million. Even more, they want to take on more debt and return more cash to shareholders, according to Nation’s Restaurant News.

McDonald’s also has plans of refranchising a total of 4000 restaurants until 2018, while the final aim is to have more than 95 percent of its restaurants franchised, the company said in an official statement.

The investors weren’t happy at all with this decision

Still, they’re ignoring the idea of a real estate spinoff, disappointing some investors who were looking forward to this move, considering it a key strategy for increasing shareholder value.

“We’ve closely considered a real estate investment trust, given its potential tax advantages and the valuation real estate investment trusts receive on Wall Street,” said Pete Bensen, McDonald’s chief administrative officer.

A very risky move, which already attracted a lot of attention

The company decided that a real estate spinoff would be a very risky move, considering their relationships with franchises and its current turnaround. Also, there were some IRS comments recently, claiming that corporations are using these spinoffs in order to avoid paying taxes. Therefore, we won’t see a real estate investment trust in the near future from McDonald’s.

“We do not view a real estate transaction as significantly compelling to move the brand forward,” Pete Bensen added during the company’s investor day presentation Tuesday.

If these trusts will be avoided, this won’t stop McDonald’s from selling more units to franchises. If initially they were planning to refranchise around 3500 units, in order to get its ownership percentage to 90, from the current 81, the plans changed, as mentioned above.

Andrei

A finance and tech news journalist with a passion for entrepreneurship and business. Feel free to message me on Twitter and Facebook.