How have selling expenses affected McDonald's margins?

Selling expenses have not been directly disclosed in the financial statements of McDonald's, which affects the comparability of its margins with other companies. However, we can infer the impact of these expenses on McDonald's margins through relevant data and analysis. 1. **Impact on Net and Gross Margins**: McDonald's net margin stands at 31.72%, with a gross margin of 57.69% as of December 31, 2024. These margins are influenced by selling expenses, which, if included, would likely reduce the net and gross margins. |code|Ticker|Name|Date|Gross Profit Margin|Net Profit Margin|market_code| |---|---|---|---|---|---|---| |MCD|MCD.N|Mcdonald's|2024 Q1|56.5811|31.2692|169| |MCD|MCD.N|Mcdonald's|2024 Q2|57.3524|31.211|169| |MCD|MCD.N|Mcdonald's|2024 Q3|57.3695|31.7786|169| |MCD|MCD.N|Mcdonald's|2024 Q4|57.6931|31.7245|169| 2. **Operating Margin Comparison**: McDonald's operating profit margin is 39.38%. This margin does not include selling expenses, which are a significant cost for any business. If selling expenses were included, the operating margin would likely be lower. |code|Ticker|Name|Date|Operating Profit Margin|market_code| |---|---|---|---|---|---| |MCD|MCD.N|Mcdonald's|2024 Q1|38.3044253525693|169| |MCD|MCD.N|Mcdonald's|2024 Q2|38.78663401532506|169| |MCD|MCD.N|Mcdonald's|2024 Q3|39.509522834323164|169| |MCD|MCD.N|Mcdonald's|2024 Q4|39.375|169| 3. **Franchised Margin Analysis**: Over 80% of McDonald's stores are franchised, and these franchises have margins that are 3-4 times higher than company-operated stores. This franchised model allows for higher margins due to lower fixed costs. The impact of selling expenses is mitigated by the higher margins generated by franchised locations. 4. **Historical Margin Trends**: McDonald's has shown an expectation of increasing its company-operated margin percent in 2025, driven by top-line growth and cost management. This suggests that effective cost control, including selling expenses, is crucial for maintaining and improving margins. In conclusion, while the direct impact of selling expenses on McDonald's margins is not explicitly quantified, it is clear that these expenses, if included, would reduce the net and gross margins. However, the franchised model's higher margins and the company's strategic cost management efforts mitigate this impact, allowing McDonald's to maintain strong profit margins.