Will Investing in McDonalds Also Generate Social Return?

/ Charisse Says/

Over the last few years, I have been looking for ways to align my investments with opportunities that can have a big impact on not only me but the communities I care about. Companies that aim to increase the wealth of persons of color fit into my definition of attractive investable opportunities for me.  Do you have any principles that you stand by when it comes to your investments? 

Well, I have been following McDonald’s after its announcement late last year that it plans to invest $250 million over the next five years to help new franchisees in the U.S. finance restaurants as part of a global effort to increase the diversity of the company’s base of owner-operators. Read: They want more Black and Brown franchisees. 

Now, I think part of the reason for the initiative is that McDonald’s was fire for allegedly discriminating against Black workers, franchisees and vendors. Sadly, I think many corporations oppress their Black and Brown workers as a result of the institutional racism that plagues America. That said, few companies put out initiatives that then aim to generate wealth on behalf of the oppressed group. While I am skeptical about these efforts, it’s still worth paying attention to. 

First, however, I wanted to see how McDonald’s stock (Ticker: MCD) has been performing over the last several years. McDonald’s is a company that is pretty insulated from economic shocks since consumers love their Big Macs, chicken nuggets, and fries. That said, here is the stock price over the last five years compared to the performance of the S&P 500 Index. Through the end of August 2022, MCD posted a return of 112.6% versus the S&P’s 85.0%, over the last five years.  

A couple of noteworthy news events have happened since the December 2021 announcement: 

  • As cited in The Motley Fool in July, tensions between McDonald’s corporate and franchisees seem to be growing. There was a no-confidence vote on CEO Chris Kempczinski from the National Black McDonald's Operators Association, as well as strong franchisee pushback on the chain's new operations performance grading system.

  • McDonald’s had a positive second-quarter earnings release, as detailed in this CNBC article. 

  • In the 2Q22 earnings call, as outlined in Seeking Alpha, the CEO of McDonald’s Chris Kempczinski reiterated its “commitment to putting $250 million into financing options to be able to continue to attract new people to become franchisees,” and that “[its] relations with [its] franchisees globally, the 5,000 franchisees is strong. And when we're a great franchise, when we're great franchisees, this business tends to do pretty well over time.” 

Given the new developments at MCD with its focus on a more diverse franchisee portfolio, the stock’s strong performance over the past few years, and some of the ongoing tensions with operators, maybe MCD is an investable opportunity. What are your thoughts? You can potentially get a social return as well as a financial return. 

A Wealthy Girl Corner

I want to give a Wealthy Girl shout-out to my Mom, Barbara Conanan, whose birthday is today, 9/21! 

That’s it. Continue to shower the people in your life with love!