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John Gordon

 
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  • Memo To McDonald's: Core Execution Should Be On New U.S. President's To-Do List [View article]
    Denise: as always, a very wise perspective, thank you.

    On value and $1 items, for many reasons, not the least of which is minimum wage hikes, the US (and many international markets) simply can't afford $1 items anymore. It's got to find a new platform that features price but that is not only about price.

    Getting breakfast to work 24/7 (see: JACK) and a real digital program are way overdue.

    John A. Gordon
    Pacific Management Consulting Group
    http://bit.ly/m8ad9

    Sep 8 11:44 AM | Likes Like |Link to Comment
  • McDonald's: The Real Estate Juggernaut [View article]
    If there is a followon discussion on MCD real estate, what might be useful is to track the rent and occupancy proceeds generated per franchise unit and the effect that produces on franchisees. In the past, MCD used rent as a "shock absorber" to help even out early term development hurdles. That does not seem to be happening in recent years. In some cases, the MCD rent overage collected above a threshold is 18% of sales. Good for franchisor corporation, bad for franchisees.

    MCD is over 80% franchised, and trending higher as we learned this week, and franchisee free cash flow matters to the good of the whole.

    Bloomberg and I collaborated on such a review in 2013, see it on my website, below.

    John A. Gordon
    Pacific Management Consulting Group
    http://bit.ly/m8ad9


    May 29 02:24 PM | 1 Like Like |Link to Comment
  • Red Lobster Levers [View article]
    Thanks for note--but this is what DRI has reported in its earnings calls.
    May 22 12:22 PM | Likes Like |Link to Comment
  • Analyzing Companies Is A Complex Affair: Don't Use EBITDA [View article]
    In the CAPEX intense restaurant space, I've seen more problems using EBITDA --both investment decisions and compensation decisions for example-- than any other single measurement metric. Taxes, debt service and maintenance CAPEX and routine CAPEX have to be counted.

    John A. Gordon
    http://bit.ly/m8ad9
    May 18 09:20 PM | Likes Like |Link to Comment
  • Domino's Economic Castle Doesn't Mean Shares Aren't Overpriced [View article]
    Very impressive discussion template, but the comment that $50-75K in EBITDA per US franchisee is 'sustainable' is flawed. By definition, EBITDA misses debt service (principal and interest), taxes and CAPEX requirements. DPZ recently updated that to $82K in 2013, which is app. 10% of unit sales.

    National Pizza Company, the best proxy for Us Pizza Hut performance, just reported store EBITDA of 8%, partially due to rising meat and cheese costs.

    The asset light franchise model is great so long as franchisees can live off it and have enough cash flow to service their debt and remodel. This is the part of the narrative always missing.

    John A. Gordon
    http://bit.ly/m8ad9
    May 14 11:18 AM | Likes Like |Link to Comment
  • Activists Vs. Darden: Look Beyond The Real Estate [View article]
    ARG1, I'm a fundamentals analyst and motivated only by making the right analytical call. DRI price movements the last 10 trading days haven't moved at all, even with today's uptick.
    Apr 22 08:40 PM | Likes Like |Link to Comment
  • Activists Vs. Darden: Look Beyond The Real Estate [View article]
    Right, understood your point and sentiment.

    Now, hope you will lay out proper long term value logic, looking beyond the real estate, including, whether a private equity solution is not appropriate for Darden itself.

    http://bit.ly/1jvNGht
    Apr 22 12:41 PM | Likes Like |Link to Comment
  • Ignite Restaurant Group: Hidden Value In The Company's Attractive Assets [View article]
    Shaun: the Market is not so precise and does not view individual company components together well, and a revenue based multiple is a poor yardstick. That seems to be causing the large Macaroni Grill negative value.

    John A. Gordon
    chain restaurant analysis and advisory
    http://bit.ly/m8ad9
    Apr 17 11:00 AM | Likes Like |Link to Comment
  • Darden Restaurants Fiasco Continues As Lawsuit Is Filed And Shareholders Demand Vote [View article]
    Actually, both Darden and the Activists have not made compelling points. One must look beyond the real estate, which is the focus of the activists and imagine other equity ownership outcomes where a Red Lobster spinoff might make sense.

    The ownership scenarios proposed by Activists are not the only outcomes. Appearances are deceiving and one must take a longer view.

    Unlocking value is Wall Street speak for financial engineering. Its rarely right for the long term.

    See my article, Darden: Look Beyond the Real Estate, http://bit.ly/1t0uhNy.

    John A. Gordon
    chain restaurant analysis and advisory
    http://bit.ly/m8ad9
    Apr 16 12:08 PM | 1 Like Like |Link to Comment
  • Don't Sell McDonald's Stock Because Of 2 Minimum Wage Myths [View article]
    Tim, I'd recommend thinking more about restaurants as integrated whole systems, rather than just separate company owned and franchisee pieces.

    Everything affects everything else.

    MCD is a (1) real estate operator (2) franchisor and (3) company operated unit business. The business model has to be strong enough for franchisees to absorb periodic wage increases....because if they can't, restaurants don't get remodeled and in time lose sales, market share, MCD loses royalty and real estate margin. You get the drift.

    The Q for MCD the franchisor... is the business model being improved so the wage hikes are workable?

    John A. Gordon
    chain restaurant analysis and advisory
    http://bit.ly/m8ad9
    Mar 24 11:48 PM | 2 Likes Like |Link to Comment
  • 4 Potential Hurdles For The Restaurant Industry [View article]
    Hi Heather: Thanks for commenting on these complex topics. I'm just trying to track through some fine points:

    Regarding the Ellison et al calorie study, how did they relate the number of calories to the number or type of entrees? As you can imagine, restaurant menu mix is quite complicated. A 2011 Starbucks/NYC labeling/calorie study showed a very tiny decline in the number of calories ordered, but that may or may not relate to product mix and average ticket.

    Was the 2%/4% revenue shift pre and post a control?

    Regarding the projected increase in the tipped wage, am trying to understand the basis of the calculation. Until there is a federal minimum wage change and/or federal tip credit change, the tip credit effect has to be a complex calculation of what the states do, unless there is over riding federal changes.


    John A. Gordon
    chain restaurant analysis and advisory
    Pacific Management Consulting Group
    http://bit.ly/m8ad9
    Mar 6 11:50 PM | Likes Like |Link to Comment
  • McDonald's: Business Model, Valuation And Minimum Wage Legislation [View article]
    Tom, very interesting piece and academic research. One question and two comments:

    Question One: Who is the author of the undated/untitled restaurant academic paper?

    Comment One: The effect on franchisee restaurant operating margins likely will be much greater than 1 percentage point. There will be pass through of course, but it will depend.

    Comment Two: many factors have changed since the academic research time reference. The ratio of franchisee to company stores have changed, the number of restaurants has risen and the presence of dollar menus and the like all works to make this murky. The pass through has to be tested in today real world.


    John A. Gordon
    Pacific Management Consulting Group
    chain restaurant analysis and advisory
    http://bit.ly/m8ad9
    Feb 28 08:58 PM | Likes Like |Link to Comment
  • The REIT Answer For Darden Is Its Coveted Real Estate Portfolio [View article]
    Another long read on Darden (DRI) and REITs that does not discuss: (1) whats the change in the restaurant operating model due to spinning off restaurant real estate (2) that there are no restaurant REITS to serve as a proper benchmark.

    John A. Gordon
    Pacific Management Consulting group
    http://bit.ly/m8ad9
    chain restaurant analysis and advisory
    Feb 14 02:51 PM | 2 Likes Like |Link to Comment
  • Expect Darden Shareholder Pressure To Intensify [View article]
    I know its popular to pile on DRI currently but a deeper analysis than the above is required. DIN is a very poor peer for DRI. EAT may work, but, BLMN is closer.

    John A. Gordon
    http://bit.ly/m8ad9
    chain restaurant analysis and advisory
    Jan 24 11:20 AM | 3 Likes Like |Link to Comment
  • Dunkin' Brands: Effective Management = Higher Yields [View article]
    Writer raises interesting questions, but a much longer, more detailed look is necessary if comparing DNKN v. SBUX, or any company owned versus franchised model.

    Two comments:

    (1) the stock trend is important, but only so relevant and representative to what's going on the fundamentals of the company. SBUX's EPS and SSS trends have been generally better, and its free cash flow exceeds that of DNKN by a factor of four.

    (2) the value of a corporate directed franchisee advisory council is not that it exists, but how it influences franchisor stewardship and provides a useful platform for franchisees to own, invest and be more successful. That is a much more complicated story.
    Dec 26 03:41 PM | Likes Like |Link to Comment
COMMENTS STATS
174 Comments
68 Likes