Is McDonald’s a Great Long-Term Investment?

PHOTO CREDIT: McDonald’s

OVERVIEW

McDonald’s Corporation is an American fast food restaurant chain. The company designs, makes, and sells many food and beverage products across the nearly 38 thousand locations. The company operates in over 100 countries around the world. The company was founded in 1940.

Why You Should?

  1. McDonald’s has been developing its website and app, as well as its drive through locations, in order to benefit off a changer consumer trend as more people order their meals through this channel instead of ordering in a restaurant. This development has benefited the company before and during this pandemic, and will continue to benefit the company’s sales in the future.
  2. Many people think about McDonald’s as a fast food restaurant chain, but it is much more than that. At most of its locations, franchisees pay rent on the land that their location is on to McDonald’s, who is the official land owner. No other restaurant chain does this and it has proved beneficial to McDonald’s growth. The company owns a lot of lucrative land it large cities to small towns around the world.
  3. McDonald’s has an extremely strong brand recognition round the world. The double arches represents an old and classic American fast food restaurant around the world. In fact, there are many consumers in international markets who prefer to eat at McDonald’s despite there being an abundance of local and better options. This brand recognition and loyalty will benefit the company’s future growth and will also benefit investors in the company.
  4. McDonald’s is a great reopening play in an investor’s portfolio. The company has had to shut down or limit operations in all of the restaurants that they have. This has caused a drop in sales in areas with widespread lockdowns (like Europe and Asia). This has hurt the company but once these areas start to reopen, the company will once again have strong growth opportunities. This will also benefit investors in the company.

Why You Should Not?

  1. McDonald’s faces tough competition from many companies around the world. Aside from small business competition, the company faces competition from Domino’s, YUM Brands, Restaurant Brands International, and many others. This might hurt the company and investors in the future.
  2. The COVID-19 Pandemic has hurt the entire restaurant industry. McDonald’s is no different as the company saw a drop in sales from locations found in tourist areas and areas with lockdowns. Higher cleaning costs and fees have also hurt the company. However, once this pandemic is over, the company will return to strong growth.
  3. McDonald’s has been impacted by changing consumer trends in the past. For example, consumers want healthier and more environmentally friendly options (like plant based meats, salads, etc.). McDonald’s has reported weaker results in the past due to this. However, the company has been investing into the future of food as they partner with any plant-based meat brands and offer healthier food options.

MY OPINION

I think that McDonald’s is a great long-term investment due to its mobile order investments, a strong portfolio of real estate, an extremely strong brand recognition around the world, and its position as a good reopening play. However, tough competition, impacts from the pandemic, and changing consumer trends might hurt the company and investors in the future.

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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