Transcription
McDonald’s CorporationMcDonald’s, the Web and youMcDonald’s PlazaOak Brook IL 60523www.mcdonalds.comThe Web is a great vehicle to provide convenient, value-added services to shareholders. Here are afew highlights of what’s available to McDonald’s shareholders on the Web. Learn more . . . stay informed No doubt about it, the Investors section ofwww.mcdonalds.com is the source for the latest McDonald’s investor news andupdates on recent and upcoming investor activities. Listen to or watch Investor Webcastsof events, such as the annual meeting or quarterly earnings conference calls. Sign up for E-MailNotification so you’ll be automatically advised when new investor information and services areavailable on our website. Annual Report and Proxy online Yes, Virginia, you can eliminate those bulky paperannual reports and proxy materials from your mailbox and help save your Company money. Sign upto access ourannual report and proxy and to vote your shares online, and we’lle-mail everything you need to do so. MCDirect Shares participants, investors holding McDonald’sstock certificates and those whose shares are held in safekeeping at EquiServe can sign up atwww.econsent.com/mcd by providing their account number and registration or U.S.social security number. Most investors whose shares are held by their broker or bank can sign up atwww.icsdelivery.com. Access MCDirect Shares The Web makes it more convenient to access and participate inthe Company’sdirect stock purchase plan, MCDirect Shares. At www.equiserve.com,eligible investors can obtain a MCDirect Shares prospectus, enroll in the Plan and use many of thePlan’s services while online. How many shares do I have? When was mylast stock purchase? How do I transfer shares to my children? MCDirect SharesAnswers about your accountparticipants, investors holding McDonald’s stock certificates and those whose shares are held insafekeeping at EquiServe can get answers to questions like these and many more24 hoursa day, seven days a week at www.equiserve.com. To access youraccount on this secure site, you will need McDonald’s issue number—9826, your accountnumber, U.S. Social Security number, if applicable, and password. To obtain a password, follow theinstructions on this site. If your broker or bank holds your shares, you may want to ask if a similarservice is available. More smiles online There are all types of fun and interesting information onwww.mcdonalds.com. Click on Ronald & Friends for games and more, find a restaurantin the U.S. or U.K. or learn about McDonald’s in other countries. You also can get information aboutnutrition, franchising, U.S. career opportunities, Company history, promotions in many parts of theworld and much more on our website.McDonald’sCorporationAnnual Report2000
Letter to shareholders 1Dear shareholders,When was your first visit to McDonald’s? on Saturdayyou and your dad sharing someone-on-one time together? on a date with your first love? when your grandchild treated because, after all, youmorning—just when your teacher worked the frontcounter during a school fundraiser? for the grandILetter to shareholders1Performance 20004McDonald’s vision6A smile is our victory sign8News and notes22Social responsibility24Commitment to quality & safety25CFO review26Year in review27Financial statements36Financial comments40Directors and corporate officers48Investor information48McDonald’s, the Web and youBack coverFlip the bottom corners ofthe pages on the right towatch someone enjoying aMcDonald’s meal!opening of the first McDonald’s in your town or country? on a summer outing with your entire family? for somestolen moments to catch up with an old friend? at abirthday party for your best friend? to celebrate yourteam’s victory—or to cheer you up after a defeat? to apply for your first job? for lunch with the gangat work? for a pick-me-up after taking your collegeentrance exams? to celebrate your child’s performancein a school play?Company employees—has created a remark-by thanking you, our share-able history of innovation in menu, brandholders, for investing inbuilding, technology, operations and restaurantMcDonald’s. Your faith in ouraren’t really so square?Contents’ll begin this annual letter.constant currencynet income percommon shareincreased 10 percenton Systemwide salesthat surpassed the 40 billion mark forthe first time in ourhistory.future and your confidence inIn the area of social responsibility, McDonald’sour brand are deeply appreci-commitment to giving back to communities is asated. We are committed to making each andold as the brand itself. Clearly, it is the right thingevery one of you look exceedingly wise from anto do. Nevertheless, we are pleased with theinvestment point of view as we pursue our visionongoing recognition we receive for our efforts andto be the world’s best quick-service restaurantare proud of the trust we build with customersexperience. We want you to own shares ofand their communities. In fact, I believe that byMcDonald’s over the long term, and we knowdoing the right thing, we enhance the loyalty andthe only way this will happen is through the long-affection customers have toward our brand.term growth of our business in ways that notonly meet your expectations—but exceed them.I’d like to outline what, I believe, are yourexpectations . . .First, and obviously, you expect strong finan-memories you experience at McDonald’s to keep you*Excluding 1998 Made For You costsand the 1998 special charge.Financially, our global food service businessperformed well despite challenges. In Europe,there were the well-reported currency issuesthat keeps a business fresh and at the cuttingwere consumer concerns related to BSE—oredge. Finally, you increasingly expect the compa-mad cow disease—in the beef supply in certainnies in which you invest to connect with yourEuropean markets. And Asia and Latin Americavalues and to demonstrate social responsibility.faced continuing economic downturns.Nevertheless, constant currency net incomehas stood up well against each of these broadper common share increased 10 percent onexpectations.Systemwide sales that surpassed the 40 billionmark for the first time in our history. We addedMcDonald’s has consistently delivered record1,606 McDonald’s restaurants, and with theannual earnings* in our 35 years as a publicsuccessful completion of our Boston Marketcompany.acquisition, we added 792 restaurants under ourOn the leadership front, we have a heritage ofcoming back again and again.perform against this set of expectations?throughout the year and later in the year thereIn the area of financial performance,visit, we want the smiles we deliver and the specialLooking back over 2000, how did McDonald’scial results. Next, you look for leadership, the kindOver the years, McDonald’s track record Whatever the reason for your firstdevelopment.Other Brands. At year-end 2000, we operatedcreating and executing strategies that leave the28,707 restaurants in 120 countries. In all, wecompetition trailing well behind. Our System’sserved nearly 1 billion additional customers, forleadership—owner/operators, suppliers anda total of 16.5 billion customer visits.
Letter to shareholders 1Dear shareholders,When was your first visit to McDonald’s? on Saturdayyou and your dad sharing someone-on-one time together? on a date with your first love? when your grandchild treated because, after all, youmorning—just when your teacher worked the frontcounter during a school fundraiser? for the grandILetter to shareholders1Performance 20004McDonald’s vision6A smile is our victory sign8News and notes22Social responsibility24Commitment to quality & safety25CFO review26Year in review27Financial statements36Financial comments40Directors and corporate officers48Investor information48McDonald’s, the Web and youBack coverFlip the bottom corners ofthe pages on the right towatch someone enjoying aMcDonald’s meal!opening of the first McDonald’s in your town or country? on a summer outing with your entire family? for somestolen moments to catch up with an old friend? at abirthday party for your best friend? to celebrate yourteam’s victory—or to cheer you up after a defeat? to apply for your first job? for lunch with the gangat work? for a pick-me-up after taking your collegeentrance exams? to celebrate your child’s performancein a school play?Company employees—has created a remark-by thanking you, our share-able history of innovation in menu, brandholders, for investing inbuilding, technology, operations and restaurantMcDonald’s. Your faith in ouraren’t really so square?Contents’ll begin this annual letter.constant currencynet income percommon shareincreased 10 percenton Systemwide salesthat surpassed the 40 billion mark forthe first time in ourhistory.future and your confidence inIn the area of social responsibility, McDonald’sour brand are deeply appreci-commitment to giving back to communities is asated. We are committed to making each andold as the brand itself. Clearly, it is the right thingevery one of you look exceedingly wise from anto do. Nevertheless, we are pleased with theinvestment point of view as we pursue our visionongoing recognition we receive for our efforts andto be the world’s best quick-service restaurantare proud of the trust we build with customersexperience. We want you to own shares ofand their communities. In fact, I believe that byMcDonald’s over the long term, and we knowdoing the right thing, we enhance the loyalty andthe only way this will happen is through the long-affection customers have toward our brand.term growth of our business in ways that notonly meet your expectations—but exceed them.I’d like to outline what, I believe, are yourexpectations . . .First, and obviously, you expect strong finan-memories you experience at McDonald’s to keep you*Excluding 1998 Made For You costsand the 1998 special charge.Financially, our global food service businessperformed well despite challenges. In Europe,there were the well-reported currency issuesthat keeps a business fresh and at the cuttingwere consumer concerns related to BSE—oredge. Finally, you increasingly expect the compa-mad cow disease—in the beef supply in certainnies in which you invest to connect with yourEuropean markets. And Asia and Latin Americavalues and to demonstrate social responsibility.faced continuing economic downturns.Nevertheless, constant currency net incomehas stood up well against each of these broadper common share increased 10 percent onexpectations.Systemwide sales that surpassed the 40 billionmark for the first time in our history. We addedMcDonald’s has consistently delivered record1,606 McDonald’s restaurants, and with theannual earnings* in our 35 years as a publicsuccessful completion of our Boston Marketcompany.acquisition, we added 792 restaurants under ourOn the leadership front, we have a heritage ofcoming back again and again.perform against this set of expectations?throughout the year and later in the year thereIn the area of financial performance,visit, we want the smiles we deliver and the specialLooking back over 2000, how did McDonald’scial results. Next, you look for leadership, the kindOver the years, McDonald’s track record Whatever the reason for your firstdevelopment.Other Brands. At year-end 2000, we operatedcreating and executing strategies that leave the28,707 restaurants in 120 countries. In all, wecompetition trailing well behind. Our System’sserved nearly 1 billion additional customers, forleadership—owner/operators, suppliers anda total of 16.5 billion customer visits.
2 Letter to shareholdersLetter to shareholders 3In the United States, where competition isintense, the percent increase in operatingincome was in the high-single digits on a 3 per-The 120 countriesin which weoperate represent95 percent of theworld’s purchasingpower. Yet, wefeed less than1 percent of theworld’s populationon any given day.As we look forward to continued progress in1,500 to 1,600 McDonald’s restaurants and areexample, we’re not on your list of options. So,focused on increasing sales at existing restaurants.we are developing new concepts to leverage our2001, we know there is one key to our successexpertise in building best-in-class brands and to—our family of more than 1.5 million employees,In the U.S., we already are seeing the bene-cent sales increase. Notably, the U.S. businessfits of our investment in the Made For You foodcapture additional meal occasions around theowner/operators and suppliers around the world.has posted positive comparable sales in 11 ofpreparation system with improvement in cus-world. These brands include Boston Market,They bring the McDonald’s brand to life for ourthe past 12 quarters, an excellent indication oftomer ratings of the taste and freshness attributesChipotle Mexican Grill and Donatos Pizza in thecustomers every day, and we count on them toour momentum. And in Europe, Asia/Pacific andof our food. In addition, Made For You hasU.S.; and United Kingdom-based Aroma Cafémake our customers smile—every customer, onLatin America, sales in 2000 increased 9 percentprovided the platform for new product additions,and Pret A Manger.every visit.in constant currencies. As mentioned earlier,including the introduction of our New TastesWe are also leveraging our food servicethere have been consumer concerns about theMenu this past January. This menu has theexperience by participating in the development—at the incredible levels of dedication andbeef supply in certain European markets.potential to create a permanent branded category,of global Internet-related services. Last year, wepassion our people have for the business andHowever, because of our product specificationssimilar to our Extra Value Meal approach. Weformed eMac Digital in partnership with Accel-their communities. I believe these attributes areI am always impressed—and often amazedand the trust customers have in McDonald’s, thisalso are developing aggressive plans to doubleKKR, which is developing on-line technologiesuniquely McDonald’s. I also am proud of theissue has affected our sales much less than thoseour sales in the U.S. over the next 10 years,to benefit both the McDonald’s System and thevast experience and variety of backgrounds thatof others. And as shareholders, you also canand triple owner/operator cash flow—primarilyfood service industry.many of our people bring to The Golden Arches.trust that McDonald’s is committed to adheringthrough our existing restaurants.to the highest safety standards in the world andalways meets or exceeds government standards.Given the tough business environment, ourwith pork and chicken selections, building ourbreakfast business and offering customers greatgains were modest. Nevertheless, we were ablevalue. Also, as much of the European communityto extend our lead in virtually every market inunites in one currency, we will leverage thewhich we do business, as it was even tougherMcDonald’s System to cut costs and achievefor many of our competitors.additional synergies.McDonald’s total return to investors over theIn Asia/Pacific, we will continue to focus onpast 10 years was 17.5 percent. But the reality isour traditional menu and add products that reflectour stock did not perform well in 2000. Althoughthe popularity of chicken. We will also exploreour overall financial performance was good, itother ways to best meet local preferences.was not as good as we expected, and this wasreflected in our stock price.Looking ahead, our financial goals are toSo, we continue to focus on growing ourIn Europe, we are increasing menu varietyAnd, despite the current economic challenges,we see Latin America as a great market for ourbusiness long term given its large population,continue growing earnings per share, to increasestrong family emphasis and young demographics.return on investment and to grow shareholderSo, we will continue to emphasize value, buildingvalue at a rate that our investors expect andour brand and growing market share. By develop-deserve.ing a loyal customer base, we will be poised forI am alwaysimpressed—andoften amazed—at the incrediblelevels of dedicationand passion ourpeople have forthe business andtheir communities.I believe theseattributes areuniquelyMcDonald’s.For example, on a recent trip I met a restaurantpowerful McDonald’s brand, growing our promis-manager in China, who studied medicine buting new brands and leveraging our strengths.decided to pursue a career with McDonald’s.Now, let’s look at what I believe is the thirdOn the same trip, I also met with our two joint-investor expectation—being a socially responsibleventure partners in Korea, who were bothorganization. We work with a passion to makesuccessful entrepreneurs prior to partneringthe world a better place—whether it is offeringwith McDonald’s.disaster relief after the recent earthquakes inIn today’s society, any successful businessEl Salvador and India, or celebrating the openingneeds to recruit and retain good people. I believeof the 206th Ronald McDonald House in Mexicothat, in many countries, we have a competitiveCity, or our continuing environmental and animalstrength in this area. In fact, when I visited Brazilwelfare leadership. We are a neighbor that peo-recently, I was proud to learn that McDonald’sple know they can count on in times of need.received recognition as one of the top places toWe also have the incredibly rewardingwork in the country. And we have dedicated ouropportunity to go beyond the expected with ourefforts to being the best employer in each com-global partners, especially on behalf of children.munity around the world. We know that is theIn 2000, for instance, we joined with The Waltsurest way to guarantee our success as aDisney Company in sponsoring MillenniumSystem, and your success as an investor.Dreamers—celebrating the achievements ofFinally, I want to thank you again for being2,000 outstanding young people from aroundpart of McDonald’s. I appreciate your confidenceWe will continue to support our ongoingthe world. We leveraged our sponsorship of theand look forward to enjoying success with you inour team made last year in adapting to localglobal growth with innovation and technology.Olympic Games to bring young leaders togetherthe future.market conditions and in innovating to move theOur future includes a Web-enabled system ofin an International Youth Camp program duringbusiness forward. Perhaps more importantly, werestaurants and cashless electronic transactions.the Summer Games in Sydney. And we part-Turning to another investor expectation—leadership—I am very pleased with the progressintend to build on that progress.We will continue to tap into the tremendousgrowth as the economies begin to improve.In addition to growing the McDonald’s restau-nered with the Field Museum in Chicago torant business, management is developing newsupport the reconstruction of “Sue,” the largestopportunities that exist for McDonald’s. The 120avenues for future profitable growth, primarilyT. rex fossil ever found, and to bring Sue’s storycountries in which we operate represent 95 per-through our Other Brands.to people through traveling exhibits.cent of the world’s purchasing power. Yet, weWe know that there are a number of distinctSincerely,So, we continued to take strides toward ourJack M. GreenbergChairman and Chief Executive Officer,feed less than 1 percent of the world’s popula-meal occasions that McDonald’s does notvision to be the best through our financial perfor-Shareholdertion on any given day. In 2001, we plan to addmeet—when you want pizza or ethnic food, formance, leadership and social responsibility efforts.March 8, 2001
2 Letter to shareholdersLetter to shareholders 3In the United States, where competition isintense, the percent increase in operatingincome was in the high-single digits on a 3 per-The 120 countriesin which weoperate represent95 percent of theworld’s purchasingpower. Yet, wefeed less than1 percent of theworld’s populationon any given day.As we look forward to continued progress in1,500 to 1,600 McDonald’s restaurants and areexample, we’re not on your list of options. So,focused on increasing sales at existing restaurants.we are developing new concepts to leverage our2001, we know there is one key to our successexpertise in building best-in-class brands and to—our family of more than 1.5 million employees,In the U.S., we already are seeing the bene-cent sales increase. Notably, the U.S. businessfits of our investment in the Made For You foodcapture additional meal occasions around theowner/operators and suppliers around the world.has posted positive comparable sales in 11 ofpreparation system with improvement in cus-world. These brands include Boston Market,They bring the McDonald’s brand to life for ourthe past 12 quarters, an excellent indication oftomer ratings of the taste and freshness attributesChipotle Mexican Grill and Donatos Pizza in thecustomers every day, and we count on them toour momentum. And in Europe, Asia/Pacific andof our food. In addition, Made For You hasU.S.; and United Kingdom-based Aroma Cafémake our customers smile—every customer, onLatin America, sales in 2000 increased 9 percentprovided the platform for new product additions,and Pret A Manger.every visit.in constant currencies. As mentioned earlier,including the introduction of our New TastesWe are also leveraging our food servicethere have been consumer concerns about theMenu this past January. This menu has theexperience by participating in the development—at the incredible levels of dedication andbeef supply in certain European markets.potential to create a permanent branded category,of global Internet-related services. Last year, wepassion our people have for the business andHowever, because of our product specificationssimilar to our Extra Value Meal approach. Weformed eMac Digital in partnership with Accel-their communities. I believe these attributes areI am always impressed—and often amazedand the trust customers have in McDonald’s, thisalso are developing aggressive plans to doubleKKR, which is developing on-line technologiesuniquely McDonald’s. I also am proud of theissue has affected our sales much less than thoseour sales in the U.S. over the next 10 years,to benefit both the McDonald’s System and thevast experience and variety of backgrounds thatof others. And as shareholders, you also canand triple owner/operator cash flow—primarilyfood service industry.many of our people bring to The Golden Arches.trust that McDonald’s is committed to adheringthrough our existing restaurants.to the highest safety standards in the world andalways meets or exceeds government standards.Given the tough business environment, ourwith pork and chicken selections, building ourbreakfast business and offering customers greatgains were modest. Nevertheless, we were ablevalue. Also, as much of the European communityto extend our lead in virtually every market inunites in one currency, we will leverage thewhich we do business, as it was even tougherMcDonald’s System to cut costs and achievefor many of our competitors.additional synergies.McDonald’s total return to investors over theIn Asia/Pacific, we will continue to focus onpast 10 years was 17.5 percent. But the reality isour traditional menu and add products that reflectour stock did not perform well in 2000. Althoughthe popularity of chicken. We will also exploreour overall financial performance was good, itother ways to best meet local preferences.was not as good as we expected, and this wasreflected in our stock price.Looking ahead, our financial goals are toSo, we continue to focus on growing ourIn Europe, we are increasing menu varietyAnd, despite the current economic challenges,we see Latin America as a great market for ourbusiness long term given its large population,continue growing earnings per share, to increasestrong family emphasis and young demographics.return on investment and to grow shareholderSo, we will continue to emphasize value, buildingvalue at a rate that our investors expect andour brand and growing market share. By develop-deserve.ing a loyal customer base, we will be poised forI am alwaysimpressed—andoften amazed—at the incrediblelevels of dedicationand passion ourpeople have forthe business andtheir communities.I believe theseattributes areuniquelyMcDonald’s.For example, on a recent trip I met a restaurantpowerful McDonald’s brand, growing our promis-manager in China, who studied medicine buting new brands and leveraging our strengths.decided to pursue a career with McDonald’s.Now, let’s look at what I believe is the thirdOn the same trip, I also met with our two joint-investor expectation—being a socially responsibleventure partners in Korea, who were bothorganization. We work with a passion to makesuccessful entrepreneurs prior to partneringthe world a better place—whether it is offeringwith McDonald’s.disaster relief after the recent earthquakes inIn today’s society, any successful businessEl Salvador and India, or celebrating the openingneeds to recruit and retain good people. I believeof the 206th Ronald McDonald House in Mexicothat, in many countries, we have a competitiveCity, or our continuing environmental and animalstrength in this area. In fact, when I visited Brazilwelfare leadership. We are a neighbor that peo-recently, I was proud to learn that McDonald’sple know they can count on in times of need.received recognition as one of the top places toWe also have the incredibly rewardingwork in the country. And we have dedicated ouropportunity to go beyond the expected with ourefforts to being the best employer in each com-global partners, especially on behalf of children.munity around the world. We know that is theIn 2000, for instance, we joined with The Waltsurest way to guarantee our success as aDisney Company in sponsoring MillenniumSystem, and your success as an investor.Dreamers—celebrating the achievements ofFinally, I want to thank you again for being2,000 outstanding young people from aroundpart of McDonald’s. I appreciate your confidenceWe will continue to support our ongoingthe world. We leveraged our sponsorship of theand look forward to enjoying success with you inour team made last year in adapting to localglobal growth with innovation and technology.Olympic Games to bring young leaders togetherthe future.market conditions and in innovating to move theOur future includes a Web-enabled system ofin an International Youth Camp program duringbusiness forward. Perhaps more importantly, werestaurants and cashless electronic transactions.the Summer Games in Sydney. And we part-Turning to another investor expectation—leadership—I am very pleased with the progressintend to build on that progress.We will continue to tap into the tremendousgrowth as the economies begin to improve.In addition to growing the McDonald’s restau-nered with the Field Museum in Chicago torant business, management is developing newsupport the reconstruction of “Sue,” the largestopportunities that exist for McDonald’s. The 120avenues for future profitable growth, primarilyT. rex fossil ever found, and to bring Sue’s storycountries in which we operate represent 95 per-through our Other Brands.to people through traveling exhibits.cent of the world’s purchasing power. Yet, weWe know that there are a number of distinctSincerely,So, we continued to take strides toward ourJack M. GreenbergChairman and Chief Executive Officer,feed less than 1 percent of the world’s popula-meal occasions that McDonald’s does notvision to be the best through our financial perfor-Shareholdertion on any given day. In 2001, we plan to addmeet—when you want pizza or ethnic food, formance, leadership and social responsibility efforts.March 8, 2001
4 Performance at a glancePerformance at a glance 5Performance 2000 40.211-year summary 31.8Systemwide salesin billionsSystemwidesales exceeded 40 billion for thefirst time in ourhistory.McDonald’s servednearly 1 billionmore customersthan in 1999.Earnings pershare increased10 percent inconstant currencies.19962000Operating income* in billions20001996 3.3 2.6Total assets in billions 21.72000 17.41996U.S.EuropeAsia/PacificLatin AmericaOtherCorporateCumulative share repurchases in billionsWe repurchased 2 billion ofMcDonald’s stockduring 2000,bringing totalrepurchases underour three-yearprogram to 3.3 9219911990 ,88519,92818,759Operated by franchisees ,47412,95912,017Operated by the Company 85,019Operated by affiliates 1,72312,421DOLLARS IN MILLIONS, EXCEPT PER SHARE DATAMore than1,600 McDonald’srestaurants andnearly 800restaurantsoperating underOther Brands wereadded.19981999 5.52000Net income per common share—diluted**in dollars 1.501.251.00.75.5019961997199819992000Compound annual growth rates for the 10-year periodended December 31, 2000Systemwide salesTotal revenuesOperating incomeNet incomeNet income per common share–dilutedCash provided by operationsTotal assetsTotal shareholders' equityTotal return to investors on common stock7.9%7.97.69.410.57.87.48.217.5*Graph excludes corporate segment.**Excluding 1998 Made For You costs and 1998 special charge.25We introduced TheGolden Arches toAmerican Samoaand FrenchGuiana, bringingthe total number ofcountries in whichwe operate to 120.McDonald’s ranked#1 in socialresponsibility inFortune magazine’s2000 listing ofAmerica’s MostAdmired Companies.Systemwide salesSystemwide sales by typeTotal revenues ,640Operating income 3,3303,3202,762 (1)2,8082,6332,6012,2411,9841,8621,6791,596Income before provision for income taxes 2,8822,8842,307 (1)2,4072,2512,1691,8871,6761,4481,2991,2
McDonald’s Corporation Annual Report 2000 McDonald’s, the Web and you The Web is a great vehicle to provide convenient, value-added services to shareholders. Here are a . nutrition, franchising, U.S. career opportunities, Company history, promotions
