McDonald’s – 2007

Forest David: Francis Marion University

A. Case Abstract

McDonald’s Corporation (www.mcdonalds.com) is a comprehensive business policy

and strategic management case that includes the company’s fiscal year-end
December 2006 financial statements, competitor information and more. The case
time setting is the year 2007. Sufficient internal and external data are provided to
enable students to evaluate current strategies and recommend a three-year
strategic plan for the company. Headquartered in Oak Brook in the U.S. state of
Illinois, McDonald’s common stock is traded on the New York Stock Exchange
under the ticker symbol MCD.

McDonald’s sells various fast food items and soft drinks including, burgers, chicken,
salads, fries, and ice cream. McDonald’s is led by CEO Jim Skinner whose basic pay
was over US$10 million in 2006. The firm’s major competitors are Wendy’s, Burger
King, and Hardee’s.

B. Vision Statement (proposed)

Our vision is to maintain our stand as the number one fast food restaurant in the
world.

C. Mission Statement (proposed)

It is our mission to be the world’s best quick service restaurant (2). Being the best
means providing outstanding quality, service, cleanliness and value, so that we
make every customer (1) in every restaurant smile (5, 6). To achieve our mission
we must be the best employer (9) for our people in each community (8) around
the world (3), deliver excellence to our customers in each of our restaurants and
achieve profitable growth by expanding the brand McDonald’s through innovation
and technology (4).

1. Customer
2. Products or services
3. Markets
4. Technology
5. Concern for survival, profitability, growth
6. Philosophy
7. Self-concept
8. Concern for public image
9. Concern for employees

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 D. External Audit

Opportunities

1. Rising population in China

2. Chinese consider drive-thrus a novelty where car ownership is growing
rapidly
3. Burger King’s market share among quick service sandwich chains dropped
10.95 percent in 2006
4. Developing a “Healthy Lifestyle” program to attract health conscious
consumers
5. Hispanic population has recently increased 14 percent in the U.S.
6. Krispy Kreme Doughnuts’ possibility of going bankrupt
7. 6 percent increase in social shopping areas (i.e. malls, plazas)

Threats

1. Increased expansion of traditional rivals

2. Yum Brands are the leading quick service chains in China
3. McDonald’s Europe sales dropped 1.9 percent
4. Burger King’s sales growth is an estimated 18.2 percent compared to
McDonald’s 11.2 percent
5. Yum Brands variety of food and wide range of prices for selections
6. Wendy’s Frescata product line increased sales by 3.2 percent
7. According to National Restaurant Association (NRA) average menu price
increased by 3.2 percent
8. Growing public awareness of fast food being unhealthy

CPM – Competitive Profile Matrix

Wendy’s McDonald’s Burger King

Critical Success Weighted Weighted Weighted
Factors Weight Rating Score Rating Score Rating Score
Market Share 0.15 2 0.30 4 0.60 2 0.30
Advertising 0.13 2 0.28 3 0.39 3 0.39
Global Expansion 0.12 1 0.12 4 0.48 2 0.24
Product Variety 0.10 4 0.40 3 0.30 3 0.30
Product Quality 0.08 1 0.08 3 0.24 2 0.16
Company Image 0.07 2 0.14 3 0.21 2 0.14
Price Competition 0.04 3 0.12 3 0.12 3 0.12
Management Experience 0.06 2 0.12 3 0.18 2 0.12
Customer Service 0.07 3 0.21 2 0.14 2 0.14
Philanthropy 0.05 2 0.10 4 0.20 1 0.05
Customer Loyalty 0.08 2 0.16 3 0.24 2 0.16
Financial Position 0.05 3 0.15 3 0.15 2 0.10
Total 1.00 2.16 3.25 2.22

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External Factor Evaluation (EFE) Matrix

Key External Factors Weight Rating Weighted

Score
Opportunities
1. Rise in population for the Chinese
market 0.05 4 0.20
2. Chinese consider drive-thrus a
novelty where car ownership is
growing rapidly 0.05 4 0.20
3. Burger King’s market share
among quick service sandwich
chains dropped 10.95 percent in
2006 0.08 3 0.24
4. Developing a “Healthy Lifestyle”
program to attract health
conscious consumers 0.15 2 0.30
5. Hispanic population has recently
increased 14 percent in the U.S. 0.05 3 0.15
6. Krispy Kreme Doughnuts’
possibility of going bankrupt 0.02 1 0.02
7. 6 percent increase in social
shopping areas (i.e. malls, plazas) 0.05 2 0.10
Threats
1. Increased expansion of traditional
rivals 0.15 3 0.45
2. Yum Brands are the leading quick
service chains in China 0.05 3 0.15
3. McDonald’s Europe sales dropped
1.9 percent 0.02 4 0.08
4. Burger King’s sales growth is an
estimated 18.2 percent compared
to McDonald’s 11.2 percent 0.05 3 0.15
5. Yum Brands variety of food and
wide range of prices for selections 0.04 2 0.08
6. Wendy’s Frescata product line
increased sales by 3.2 percent 0.04 2 0.08
7. According to National Restaurant
Association (NRA) average menu
price increased by 3.2 percent 0.05 3 0.15
8. Growing public awareness of fast
food being unhealthy 0.15 2 0.30
TOTAL 1.00 2.65

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E. Internal Audit

Strengths

1. Globally recognized brand name

2. Largest U.S. restaurant chain in international markets with approximately
17,000 stores in 120 countries
3. Consumption of food away from home accounted for 48.5 percent of total
expenditures on food
4. Total assets of US$29 billion in 2006
5. McDonald’s serves nearly 54 million customers daily
6. McDonald’s beat Starbucks, Burger King and Dunkin’ Doughnuts in a coffee
taste test according to the Consumer Report
7. In 2006 McDonald’s return nearly US$5 billion to shareholders through
shares acquired and dividends paid
8. McDonald’s sells fast food in Disney’s theme parks around the world as well
as Ocean Park in Hong Kong
9. In 2006, revenue and operating income reached a record high of US$21.6
billion and US$4.4 billion respectively
10. McDonald’s increased the company’s dividends by 50 percent, raising the
annual US$0.67 per share to US$1.00 per share totaling about US$1.2
billion

Weaknesses

1. Lack of menu development

2. Public’s perception of quality, service, and cleanliness at McDonald’s units
suffered over the past years
3. McDonald’s ranked last out of 25 fast-food chains in a recent study of drive-
thru order accuracy
4. McDonald’s 5-year average sales are 8.14 compared to 8.89 for the industry
5. Operations loss in Islands of Jamaica, Barbados, Bermuda
6. Long-term debt remains over US$8 billion
7. Low personnel productivity
8. Yum Brands return-on-assets of 13.56 compared to McDonald’s 9.74
9. Website not user friendly

Financial Ratio Analysis (December 2007)

Growth Rates % McDonald’s Industry SP-500

Sales (Qtr vs year ago qtr) 5.70 7.50 8.30
Net Income (YTD vs YTD) -32.10 -9.10 16.00
Net Income (Qtr vs year ago qtr) 69.40 42.50 6.60
Sales (5-Year Annual Avg.) 8.14 8.89 13.34
Net Income (5-Year Annual
18.67 13.16 20.14
Avg.)
Dividends (5-Year Annual Avg.) 44.27 26.63 10.00
Price Ratios McDonald’s Industry SP-500
Current P/E Ratio 28.6 24.8 21.9
P/E Ratio 5-Year High NA 30.4 25.9
P/E Ratio 5-Year Low NA 13.0 7.4
Price/Sales Ratio 2.89 2.10 2.38

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Price/Book Value NA 3.02 3.39
Price/Cash Flow Ratio NA 5.40 10.60
Profit Margins McDonald’s Industry SP-500
Gross Margin 34.7 31.0 33.8
Pre-Tax Margin 15.7 12.1 17.5
Net Profit Margin 10.3 8.1 12.4
5Yr Gross Margin (5-Year Avg.) 32.4 30.5 33.5
5Yr PreTax Margin (5-Year Avg.) 17.1 12.3 16.8
5Yr Net Profit Margin (5-Year
11.7 8.5 11.7
Avg.)
Financial Condition McDonald’s Industry SP-500
Debt/Equity Ratio NA 0.69 1.19
Current Ratio NA 0.4 0.9
Quick Ratio NA 0.4 0.7
Interest Coverage 7.6 13.9 43.3
Leverage Ratio NA 1.7 4.0
Book Value/Share NA 3.58 16.25
Adapted from www.moneycentral.msn.com

Date Avg. P/E Price/Sales Price/Book Net Profit Margin

(%)
12/07 26.50 3.13 NA 10.2
12/06 16.10 2.66 3.45 13.7
12/05 15.70 2.17 2.81 13.0
12/04 15.60 2.20 2.87 12.2
12/03 17.10 1.85 2.62 8.8

Date Book Value/ Debt/Equity ROE ROA Interest

Share (%) (%) Coverage
12/07 NA 0.00 NA NA 9.5
12/06 $12.84 0.55 18.5 9.9 11.0
12/05 $11.99 0.67 17.1 8.6 11.1
12/04 $11.18 0.65 16.0 8.2 9.7
12/03 $9.50 0.81 12.6 5.8 7.2
Adapted from www.moneycentral.msn.com

Net Worth Analysis (December 2006 in millions)

1. Stockholders’ Equity + Goodwill = 15,458 + 2,200 $17,658

2. Net income x 5 = $3,544 x 5= $ 17,720
3. Share price = $57/EPS 2.00 =$28.5 x Net Income $3,544= $
101,004
4. Number of Shares Outstanding x Share Price = 1,180 x $57 = $ 67,260
Method Average $50,910

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Internal Factor Evaluation (IFE) Matrix

Key Internal Factors Weight Rating Weighted

Score
Strengths
1. Globally recognized brand name 0.08 4 0.32
2. Largest U.S. restaurant chain in
international markets with approx.
17,000 stores in 120 countries 0.15 4 0.60
3. Consumption of food away from home
accounted for 48.5 percent of total
expenditures on food 0.06 4 0.24
4. Total assets of US$29 billion in 2006 0.10 4 0.40
5. McDonald’s serves nearly 54 million
customers daily 0.02 4 0.08
6. McDonald’s beat Starbucks, Burger King
and Dunkin’ Doughnuts in a coffee taste
test according to the Consumer Report 0.04 4 0.16
7. In 2006 McDonald’s return nearly US$5
billion to shareholders’ through shares
acquired and dividends paid 0.05 4 0.20
8. McDonald’s sells fast food in Disney’s
theme parks around the world as well
as Ocean Park in Hong Kong 0.02 4 0.08
9. In 2006, revenue and operating income
reached a record high of US$21.6 billion
and US$4.4 billion respectively 0.12 4 0.48
10. McDonald’s increased the company’s
dividends by 50 percent, raising the
annual US$0.67 per share to US$1.00
per share totaling about US$1.2 billion 0.04 4 0.16
Weaknesses
1. Lack of menu development 0.03 2 0.06
2. Public’s perception of quality, service,
and cleanliness at McDonald’s units
suffered over the past years 0.08 2 0.16
3. McDonald’s ranked last out of 25 fast-
food chains in a recent study of drive-
thru order accuracy 0.08 2 0.16
4. McDonald’s 5-year average sales are
8.14 compared to 8.89 for the industry 0.02 2 0.04
5. Operations loss in Islands of Jamaica,
Barbados, Bermuda 0.01 1 0.01
6. Long-term debt remains over $8 billion 0.02 2 0.04
7. Low personnel productivity 0.01 1 0.01
8. Yum Brands return-on-assets of 13.56
compared to McDonald’s 9.74 0.05 2 0.10
9. Website not user friendly 0.02 1 0.02
TOTAL 1.00 3.32

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F. SWOT Strategies

Strengths Weaknesses
1. Globally recognized 1. Lack of menu
brand name development
2. Largest U.S. restaurant 2. Public’s perception of
chain in international quality, service, and
markets with cleanliness at
approximately 17,000 McDonald’s units
stores in 120 countries suffered over the past
3. Consumption of food years
away from home 3. McDonald’s ranked last
accounted for 48.5 out of 25 fast-food
percent of total chains in a recent
expenditures on food study of drive- thru
4. Total assets of US$29 order accuracy
billion in 2006 4. McDonald’s 5-year
5. McDonald’s serves average sales are 8.14
nearly 54 million compared to 8.89 for
customers daily the industry
6. McDonald’s beat 5. Operations loss in
Starbucks, Burger King Islands of Jamaica,
and Dunkin’ Doughnuts Barbados, Bermuda
in a coffee taste test 6. Long-term debt
according to the remains over US$8
Consumer Report billion
7. In 2006 McDonald’s 7. Low personnel
return nearly US$5 productivity
billion to shareholders 8. Yum Brands return-
through shares on-assets of 13.56
acquired and dividends compared to
paid McDonald’s 9.74
8. McDonald’s sells fast 9. Website not user
food in Disney’s theme friendly
parks around the world
as well as Ocean Park
in Hong Kong
9. In 2006, revenue and
operating income
reached a record high
of US$21.6 billion and
US$4.4 billion
respectively
10. McDonald’s
increased the
company’s dividends
by 50 percent, raising
the annual US$0.67
per share to US$1.00
per share totaling
about US$1.2 billion

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Opportunities S-O Strategies W-O Strategies
1. Rising population in 1. Expand into Chinese 1. Menu Development
China market (Increase (Healthy Lifestyle &
2. Chinese consider drive- advertising and Hispanic foods lines)
thrus a novelty where restaurant locations) Product Development
car ownership is Market Development (W1, O4)
growing rapidly (S1, S2, O1)
3. Burger King’s market 2. Acquire Krispy Kreme
share among quick Corporation –
service sandwich Horizontal Integration
chains dropped 10.95 (S6, O6)
percent in 2006
4. Developing a “Healthy
Lifestyle” program to
attract health
conscious consumers
5. Hispanic population
has recently increased
14 percent in the U.S.
6. Krispy Kreme
Doughnuts’ possibility
of going bankrupt
7. 6 percent increase in
social shopping areas
(i.e. malls, plazas)
Threats S-T Strategies W-T Strategies
1. Increased expansion of 1. Increase the number of 1. Develop the menu to
traditional rivals restaurants located in keep up with
2. Yum Brands are the theme parks Disney & competition (Asian &
leading quick service Ocean Park) Foreword Latin American items)
chains in China Integration (S8, T1) Product Development
3. McDonald’s Europe 2. Increase advertising of (W1,T1)
sales dropped 1.9 coffee line in key 2. Redesign the website
percent markets (China, North to make it more user
4. Burger King’s sales America) – Market friendly and to
growth is an estimated Penetration (S6, T3, compete better with
18.2 percent compared T4,) competition, Product
to McDonald’s 11.2 Development (W9, T1)
percent 3. Increase sales
5. Yum Brands variety of promotions and
food and wide range of advertising
prices for selections expenditures in key
6. Wendy’s Frescata markets, Market
product line increased Penetration (W1, W3,
sales by 3.2 percent T1,T3, T4)
7. According to National
Restaurant Association
(NRA) average menu
price increased by 3.2
percent
8. Growing public
awareness of fast food
being unhealthy

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G. SPACE Matrix

FS
Conservative Aggressive
6

CA IS
-6 -5 -4 -3 -2 -1 1 2 3 4 5 6
-1

-2

-3

-4

-5

-6
Defensive Competitive
ES

Financial Strength (FS) Environmental Stability (ES)

Return on Assets (ROA) 4 Rate of Inflation -2
Leverage 3 Technological Changes -1
Net Income 6 Price Elasticity of Demand -2
Income/Employee 6 Competitive Pressure -6
Inventory Turnover 5 Barriers to Entry into Market -3

Financial Strength (FS) Average 4.8 Environmental Stability (ES) Average -2.8

Competitive Advantage (CA) Industry Strength (IS)

Market Share -1 Growth Potential 6
Product Quality -3 Financial Stability 6
Customer Loyalty -2 Ease of Entry into Market 3
Technological know-how -2 Resource Utilization 5
Control over Suppliers and Distributors -1 Profit Potential 5

Competitive Advantage (CA) Average -1.8 Industry Strength (IS) Average 5.0

x-axis: -1.8 + 5.0 = 3.2

y-axis: 4.8 + -2.8 = 2.0

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H. Grand Strategy Matrix

Rapid Market Growth

Quadrant II Quadrant I

Weak Strong
Competitive Competitive
Position Position

Quadrant III Quadrant IV

Slow Market Growth

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I. The Internal-External (IE) Matrix

The IFE Total Weighted Score

Strong Average Weak

3.0 to 4.0 2.0 to 2.99 1.0 to 1.99
High I II III
3.0 to 3.99

Medium IV V VI
The EFE 2.0 to 2.99
Total
Weighted
Score McDonald’s

Low VII VIII IX

1.0 to 1.99

Grow and Build

Division % Revenue
Europe 36
US 35
Asia Pacific/Middle East 14
Latin America 7
Canada 5
Corporate & Other 3

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J. QSPM

Open 200 Acquire

Key Internal Factors New Stores Krispy
in China Kreme
Strengths Weight AS TAS AS TAS
1. Globally recognized brand name 4 0.32 2 0.16
0.08
2. Largest U.S. restaurant chain in
international markets with
approximately 17,000 stores in 120 4 0.60 2 0.30
countries 0.15
3. Consumption of food away from
home accounted for 48.5 percent of 1 0.06 3 0.18
total expenditures on food 0.06
4. Total assets of US$29 billion in 2006 3 0.30 4 0.40
0.10
5. McDonald’s serves nearly 54 million
customers daily 0.02 --- --- --- ---
6. McDonald’s beat Starbucks, Burger
King and Dunkin’ Doughnuts in a
coffee taste test according to the 2 0.08 4 0.16
Consumer Report 0.04
7. In 2006 McDonald’s return nearly
US$5 billion to shareholders’ through
shares acquired and dividends paid 0.05 --- --- --- ---
8. McDonald’s sells fast food in Disney’s
theme parks around the world as
well as Ocean Park in Hong Kong 0.02 --- --- --- ---
9. In 2006, revenue and operating
income reached a record high of
US$21.6 billion and US$4.4 billion 4 0.48 3 0.36
respectively 0.12
10. McDonald’s increased the company’s
dividends by 50 percent, raising the
annual US$0.67 per share to $1.00 --- --- --- ---
per share totaling about US$1.2 bn 0.04
Weaknesses
1. Lack of menu development 0.03 1 0.03 4 0.12
2. Public’s perception of quality,
service, and cleanliness at
McDonald’s units suffered over the --- --- --- ---
past years 0.08
3. McDonald’s ranked last out of 25
fast-food chains in a recent study of --- --- --- ---
drive-thru order accuracy 0.08
4. McDonald’s 5-year average sales are
8.14 compared to 8.89 for the --- --- --- ---
industry 0.02
5. Operations loss in Islands of
Jamaica, Barbados, Bermuda 0.01 --- --- --- ---

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6. Long-term debt remains over US$8 --- --- --- ---
billion 0.02
7. Low personnel productivity 0.01 --- --- --- ---
8. Yum Brands return-on-assets of
13.56 compared to McDonald’s 9.74 0.05 --- --- --- ---
9. Website not user friendly 0.02 --- --- --- ---
SUBTOTAL 1.00 1.84 1.68

Open 200 Acquire

Key External Factors New Stores Krispy
in China Kreme
Opportunities Weight AS TAS AS TAS
1. Rise in population in China 0.05 4 0.20 1 0.05
2. Chinese consider drive-thrus a
novelty where car ownership is 4 0.20 1 0.05
growing rapidly 0.05
3. Burger King’s market share among
quick service sandwich chains --- --- --- ---
dropped 10.95 percent in 2006 0.08
4. Developing a “Healthy Lifestyle”
program to attract health conscious --- --- --- ---
consumers 0.15
5. Hispanic population has recently
increased 14 percent in the U.S. 0.05 --- --- --- ---
6. Krispy Kreme Doughnuts’ possibility
of going bankrupt 0.02 1 0.02 4 0.08
7. 6 percent increase in social shopping
areas (i.e. malls, plazas) 0.05 --- --- --- ---
Threats
1. Increased expansion of traditional 4 0.60 2 0.30
rivals 0.15
2. Yum Brands are the leading quick
service chains in China 0.05 4 0.20 1 0.05
3. McDonald’s Europe sales dropped 1.9 --- --- --- ---
percent 0.02
4. Burger King’s sales growth is an
estimated 18.2 percent compared to 3 0.15 2 0.10
McDonald’s 11.2 percent 0.05
5. Yum Brands variety of food and wide
range of prices for selections 0.04 --- --- --- ---
6. Wendy’s Frescata product line
increased sales by 3.2 percent 0.04 --- --- --- ---
7. According to National Restaurant
Association (NRA) average menu --- --- --- ---
price increased by 3.2 percent 0.05
8. Growing public awareness of fast
food being extremely unhealthy 0.15 --- --- --- ---
SUBTOTAL 1.00 1.37 0.63
SUM TOTAL ATTRACTIVENESS 3.21 2.31
SCORE

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 K. Recommendations

The QSPM strategies assessed whether opening 200 new stores in China was more
feasible than acquiring Krispy Kreme. The QSPM distinctly recommended the
former option as the most advantageous, but, considering the low cost of Krispy
Kreme, it is recommended McDonald’s undertake both strategies. Each store in
China is expected to cost US$10 million with the expectation franchisees will be
found.

Krispy Kreme Net Worth

1. Stockholders’ Equity + Goodwill = 79 + 28 $ 107

2. Net income x 5 = $-42 x 5= $ NA
3. Share price = $2.73/EPS -0.94 = NAx Net Income $-42= $ NA
4. Number of Shares Outstanding x Share Price = 65 x $2.73 = $ 177
Method Average $142

L. EPS/EBIT Analysis

US$ Amount Needed: 2,142M

Stock Price: US$57
Tax Rate: 35%
Interest Rate: 7%
# Shares Outstanding: 1,180M

Common Stock Financing Debt Financing

Recession Normal Boom Recession Normal Boom
EBIT $2,000,000,000 $4,500,000,000 $7,000,000,000 $2,000,000,000 $2,500,000,000 $3,500,000,000
Interest 0 0 0 149,940,000 149,940,000 149,940,000
EBT 2,000,000,000 4,500,000,000 7,000,000,000 1,850,060,000 4,350,060,000 6,850,060,000
Taxes 700,000,000 1,575,000,000 2,450,000,000 647,521,000 1,522,521,000 2,397,521,000
EAT 1,300,000,000 2,925,000,000 4,550,000,000 1,202,539,000 2,827,539,000 4,452,539,000
#
Shares 1,217,578,947 1,217,578,947 1,217,578,947 1,180,000,000 1,180,000,000 1,180,000,000
EPS 1.07 2.40 3.74 1.02 2.40 3.77

70 Percent Stock - 30 Percent Debt 70 Percent Debt - 30 Percent Stock

Recession Normal Boom Recession Normal Boom
EBIT $2,000,000,000 $4,500,000,000 $7,000,000,000 $2,000,000,000 $4,500,000,000 $7,000,000,000
Interest 44,982,000 44,982,000 44,982,000 104,958,000 104,958,000 104,958,000
EBT 1,955,018,000 4,455,018,000 6,955,018,000 1,895,042,000 4,395,042,000 6,895,042,000
Taxes 684,256,300 1,559,256,300 2,434,256,300 663,264,700 1,538,264,700 2,413,264,700
EAT 1,270,761,700 2,895,761,700 4,520,761,700 1,231,777,300 2,856,777,300 4,481,777,300
#
Shares 1,206,305,263 1,206,305,263 1,206,305,263 1,191,273,684 1,191,273,684 1,191,273,684
EPS 1.05 2.40 3.75 1.03 2.40 3.76

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M. Epilogue

On February 8, 2008, McDonald’s said sales were up 5.7 percent globally in

restaurants that had been open at least 13 months. That broke down to a 1.9
percent increase in same-store sales in the U.S. in January from a flat December,
compared with sales in Europe that were up 8.2 percent. The company also saw
increased traffic in its Asia/Pacific, Middle East and Africa stores, with sales up 7.8
percent. The international numbers exceeded comparable sales growth for the
corresponding period in 2007 when European sales were only up by 5.8 percent
and Asia/Pacific, Middle East and Africa units were up 4.3 percent.

On February 7, 2008, McDonald's Japan, the nation's biggest fast-food chain,

posted a fivefold increase in annual net profit and predicted further growth as it
opens new stores and refreshes its menu. McDonald's Holdings Co Ltd (Japan),
nearly half owned by McDonald's Corporation, forecast net profit would rise 28
percent in 2008 as it plans to open 130 new stores and put strength into offering
low-cost menu items and promoting coffee. Net profit soared to 7.8 billion yen in
2007, up from 1.55 billion the year before. The result was roughly in line with an
average estimate of 7.7 billion yen from analysts.

Among the reasons for McDonald’s surge in Japan was the popularity of "Mega
Macs" – four meat patties layered between three slices of bun with cheese and
lettuce. That and new breakfast menus, along with expanding the number of 24-
hour stores, helped the company ride out its disclosure in November that it may
have sold salads and other items past their expiration dates at as many as four
Tokyo outlets after employees switched product labels, although December sales
took a temporary hit. For 2008, the company forecast net profit to rise to 10
billion yen. Analysts on average are predicting a profit of 9.7 billion yen. It wants
to open a total of 300 new stores by the end of 2010.

In Japan, McDonald's plans to put particular strength into promoting its coffee,
which currently sells for 100 yen (US$0.94) a cup – a fraction of the cost of a
Starbucks latte – echoing the policy of the U.S. McDonald's, which is making a
push into the coffee market by opening coffee bars in thousands of stores.

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