Financial Performance

McDonald’s to Take $235 Million Charge in Q2

The charge is related to the chain's plan to refranchise thousands of restaurants and move its headquarters.
Christopher HosfordJuly 8, 2016

McDonald’s will take a $235 million pre-tax charge in the second quarter to account for the costs of refranchising thousands of restaurants and moving its headquarters to downtown Chicago.

The fast-food giant on Thursday said the charge will lower profit by about 20 cents a share as it seeks to save $500 million in general and administrative costs by the end of 2018.

As part of a plan announced last year, McDonald’s is selling 4,000 of its company-owned restaurants to franchisees. Of the chain’s more than 36,000 restaurants, about 80% are currently franchised.

A Better Way to Do Ecommerce

A Better Way to Do Ecommerce

Learn how Precision Medical leveraged OneWorld to cut the cost of billing in half and added $2.5M in annual revenue.

After the sales, 93% of the locations would be owned by franchisees, and the company ultimately wants to increase that number to 95%.

“Investors generally like the move toward more franchised locations because it gives companies a more stable cash flow from royalties, licensing and property leases and tends to have a higher profit margin while avoiding the ups and downs of labor and commodity costs,” The Wall Street Journal said.

McDonald’s announced last month it was moving its  headquarters from Oak Brook, Ill., to downtown Chicago, where it was based from 1955 to 1971.

“Going forward, the company expects to incur additional strategic charges in connection with these ongoing [cost-saving] initiatives,” McDonald’s said in a news release, adding that it would provide further details about the second-quarter charge when it reports earnings on July 26.

In trading Friday, the company’s stock rose 0.38% to $121.38.

Case Study: How Edgewood Tahoe’s CFO Saved 500 Jobs From the Ashes