In an aim to optimize its operations, McDonald’s (MCD) has been refranchising its restaurants, and this effort caused the company’s revenue to fall 3.9% to ~$5.7 billion in 1Q17. During the quarter, company-owned restaurants generated 60.1% of MCD’s total revenue, while franchised restaurants made up 39.9%.
McDonald’s classifies its operations into the following four segments, based on characteristics and growth opportunities:
- United States
- International Lead Markets
- High-Growth Markets
- Foundational Markets (including corporate activities)
In 1Q17, MCD’s United States segment generated ~$1.9 billion in revenue, which made up 34% of the company’s total revenue. Revenue from this segment fell 4.5% YoY (year-over-year) due to refranchising. The company operated 110 fewer company-owned restaurants YoY in 1Q17. However, some of these declines were offset by SSSG (same-store sales growth) of 1.8% and the increased number of franchised restaurants.
International Lead Markets
This segment generated revenues of ~$1.6 billion in 1Q17, accounting for 29% of the company’s total revenue. Revenue from the segment fell 4.9% YoY due to a decrease of 135 company-owned restaurants YoY. However, its SSSG of 2.8% and an increase of 185 franchised restaurants YoY offset some of these revenue declines.
In 1Q17, this segment’s revenue grew 6.6% from ~$1.4 billion to ~$1.5 billion. This revenue growth was driven by positive SSSG of 3.8%, the addition of 70 company-owned restaurants, and the addition of 253 franchised restaurants.
This segment posted revenue of $566.2 million, which represents a decline of 20.6% from $713.3 million in 1Q16. The segment operated 393 fewer company-owned restaurants YoY, which led to the decline in revenue.