Surging McDonald's Plans to Sell Off More Company-Owned Restaurants
McDonald's Corp., the world's largest hamburger franchse, announced that it would increase by 50 percent the number of company-owned restaurants it is seeking to sell, in an apparent effort to diminish efforts by a hedge fund activist. The shift toward selling more stores came the same day the company said third-quarter profit rise 15 percent, spurred in part by higher European sales and a new chicken snack wrap in the United States.
Executives also reported that the restaurant chain would boost the number of restaurants it wants to sell to 2,300. Additionally, the company announced it would sell 1,500 of the more than 1,800 company-owned eateries.
So far this year, the company has sold 121 restaurants, resulting in a pretax loss of $30.2 million, according to the filing. Once it divests a unit, McDonald’s invests no more capital and collects royalties ranging from 2 percent to 7 percent based on sales from a licensee, who owns the business and the real estate.
The shift to sell more restaurants than originally planned comes as William Ackman, managing partner of Pershing Square Capital Management, steps up pressure to force McDonald’s to sell or spin off to shareholders all of the company-owned restaurants. Ackman has announced plans to purchase $2 billion in McDonald’s stock in a move towards a possible proxy fight with the burger giant.
(Chicago Tribune, 10/20/06)
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