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.

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.

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One response to “McDonald’s to Take $235 Million Charge in Q2”

  1. Makes sense to me. Food cost raises are not going over well with the population and it may be more difficult to make profits until general inflation catches up to food inflation. Better to let the owners take the hit, not own as many stores and collect the franchise fees.

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