McDonald's Corp

The America’s segment includes revenues mainly from the US, Mexico, and Canada. This segment accounted for 73% of SBUX’s revenues in 2014.

Consumer packaged goods, or CPG, include the sale of SBUX’s coffee and tea-related products—like single-serve tea and coffee products. It also includes several beverages at retail stores.

McDonald’s list of initiatives includes simplifying its menu and possibly offering locally relevant menu items. This could be quite a gamble.

According to McDonald’s management, “strong competitive activity” is affecting its sales. Other fast food chains don’t seem to be feeling the competition.

The benefits of the franchise model include the opportunity for the company to grow faster because the franchisee provides the capital for making the restaurant ready for operation, and the franchisor faces lower risk if the store underperforms.

Restaurants seek revenue growth in a variety of ways, but after exhausting all options, restaurants pursue a unit-growth strategy to capitalize on these opportunities.

By opening restaurants for different dayparts such as breakfast, afternoon snacks, or late-night snacks, restaurants believe they will sell more products throughout the day and improve same-store sales.

Starbucks’ (SBUX) management states that product innovation will be its primary focus as it maintains a lesser focus on its coffee business.

The two most important drivers of revenue in a restaurant business are same-store sales and unit growth. Same-store sales growth measures the growth at existing stores or locations over a period of time.

Full-service restaurants make up 44% of the market share in the United States. Full-service restaurants usually serve breakfast, lunch, and dinner.

In a company-owned restaurant, the company takes ownership of the operation at the restaurant location. The company uses its own financial resources to get the location ready for business.

Limited-service restaurants can be classified into fast food or quick service, fast-casual restaurants, pizza restaurants, and cafés.

Burger King (BKW) opened a net of 131 new restaurants in the second quarter, making for a total net new restaurant count of 682 restaurants in the past 12 months.

Consumer confidence is an economic indicator. It measures how confident consumers are about the overall state of the economy. It also measures how confident people feel about their income’s stability. Their confidence impacts their economic decisions—like their spending activity.

Same-store sales are one of the important drivers in the restaurant industry. Same-store sales directly drives the revenues. It measures the percentage change in the revenues generated by existing restaurant locations over the same period last year.

McDonald’s reported flat global comparable sales and negative comparable guest count for 2Q14, which is concerning from a long-term income growth perspective.

Mainstream channels of marketing—like radio, TV, and print ads—are still common. But many restaurant chains have also used social media to increase their brand presence.

In the last part of this series, we looked at the franchise model. Let’s now take a look at the company-operated restaurant model.

The most common business models in the restaurant industry are for franchised and company-operated restaurants. Let’s look at the franchise model in closer detail.

Restaurants are simple businesses. Because we have to eat every day, people often think the restaurant industry is a safe one to invest in.

Dunkin’ Brands has a very low capital requirement relative to the rest of the coffee retail industry. This is due to its business model, centered around establishing franchises across the world.

Dunkin’ Brands Group doesn’t typically supply products to its franchises. Revenues derive from royalty fees as opposed to product distribution.

Starbucks indicates that it uses derivative contracts to hedge commodity price risks. These contracts typically don’t have a lifespan longer than five years.

This business model has allowed Starbucks to be the first coffee firm to put retail locations in each of the BRIC nations and many more.

Starbucks began in 1971 as a single coffee shop in Seattle. Today, it’s the world largest coffee retailer, with over 19,000 locations in more than 60 countries (as of FY2013 end).

Why the unionization of all fast food workers, which would increase the bargaining power of employees and possibly lead to higher wages, in quite unlikely.

Part-time work is most likely an industry-wide characteristic within the food retail business.