226040317 mcdonald-pakistan

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ASIA PACIFIC INSTITUTE OF INFORMATION
TECHNOLOGY
FINANCIAL MANAGEMENT
INVENTORY MANAGEMENT SYSTEM OF
McDonald’s
PREPARED BY:
Mustafa Sajid
M. Afzal
Mehrunnisa Ahmed

Ansar Hafeez Ratyal
PREPARED FOR:
MR.SHAHZAD MOIN
Table of Contents:
Acknowledgements…
Comments…
Introduction to Company (McDonald’s)…
• McDonald’s Vision
• McDonald’s History
• McDonald’s Pakistan
• McDonalds Global Result Reports
Systems and Methods of Inventory Management…
• Perpetual Systems
• Periodic Systems
• Comparison (Perpetual Vs Periodic)
• FIFO
• FIFO Advantages & Disadvantages
• LIFO
• LIFO Advantages & Disadvantages
• Average Cost Method
At McDonald’s…
• Components of Inventory
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• Suppliers
• Working of the System
• Re-ordering
• Advertising Policies
• Shares Policy
ACKNOWLEDGEMENTS:
First of all we are grateful to ALLAH ALMIGHTY for giving us the
power and courage to complete this Project. Secondly we are grateful to
our parents for their love, care and prayers, which helped us through all the
stages of life. We would also like to thank our teacher Mr. Shehzad Moin
for his help and guidance through out in the making of this project and also
some of our classmates and seniors who were always there to help us. We
all group members are equally thankful to each other for co-ordination and
motivation.
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COMMENTS :
First of all I would like to say that this project was a very interesting one because
it was on McDonalds which we all know is the most popular fast food restaurant. And it
was very interesting on gaining knowledge of the Inventory System of McDonalds.
McDonalds Inventory System was quite simple to understand and did not cause us very
much troubles.
The Human Resource Manager of McDonalds co-operated with us very much
and gave us 45 minutes out of his precious time, which was fortunate for us and was
enough for our group to understand the Inventory System of McDonalds and due to all
this information we started working on our project.
During this project we all (group members) had a good relation amongst each
other and enjoyed our companies. All of us morally motivated and co-operated each
other very much and spent a nice time.
During this project I came to know that theory is some how slightly different then
practical because during practical work we came to know about much more things then
we read in theory.
While doing this project my knowledge about Systems of Inventory and Methods of
Inventory was very much cleared.
I finally want to thanks and congratulate all my group members for the completion
of this project, which includes our utmost efforts. And the last but not the least I would
like to thank our honorable teacher Mr. Shehzad Moin who guided us throughout this
project and made our base strong for this subject.
Ansar Hafeez Ratyal
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COMMENTS:
Working on this project was a great experience for me and was very enjoyable.
It was a huge task on studying the inventory system which McDonalds was
implementing.
This project has helped me gain very much knowledge on the topic Inventory Systems
and Inventory Methods.
Our group co-ordination and motivation was fantastic due to we completed this project
in time and which highlights our efforts. Working in a group was very enjoying and
helpful for me in many stages.
Mehrunissa Ahmed
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COMMENTS:
I will be very thankful Mr.Shahzad who gave me a beautiful chance to learn about the
FM project. Because theory is not enough because practical is most important like
theory. In this project we learn different things like getting Information, managing,
analysis, survey, prepare question, questioning other persons so that don’t waste time
others and known history of the company so you can see a small overview about
professionalism. Finally I thank all my group members who coordinated with me and I
also enjoyed working with them.
Muhammad Afzal
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McDonald's vision...
McDonald's vision is to be the world's best quick service restaurant experience. Being
the best means providing outstanding quality, service, cleanliness and value, so that we
make every customer in every restaurant smile. To achieve our vision, we are focused
on three worldwide strategies:
1. Be The Best Employer
Be the best employer for our people in each community around the world.
2. Deliver Operational Excellence
Deliver operational excellence to our customers in each of our restaurants.
3. Achieve Enduring Profitable Growth
Achieve enduring profitable growth by expanding the brand and leveraging the
strengths of the McDonald's system through innovation and technology.
Solidifying our leadership in social responsibility.
McDonald's History
Our rich history began with our founder, Ray Kroc. The strong foundation that he built
continues today with McDonald's vision and the commitment of our talented executives
to keep the shine on McDonald's arches for years to come.
Ray Kroc mortgaged his home and invested his entire life savings to become the
exclusive distributor of a five-spindled milk shake maker called the Multimixer. Hearing
about the McDonald's hamburger stand in California running eight Multimixers at a time,
he packed up his car and headed West. It was 1954. He was 52 years old
Dick and Mac McDonald's Restaurant,
San Bernardino, California
Dick and Mac McDonald's Restaurant,
San Bernardino, California
Ray Kroc had never seen so many people served so quickly when he pulled up to take
a look. Seizing the day, he pitched the idea of opening up several restaurants to the
brothers Dick and Mac McDonald, convinced that he could sell eight of his Multimixers
to each and every one. "Who could we get to open them for us?" Dick McDonald said.
"Well," Kroc answered, "what about me?"
Where it all began, Des Plaines, Illinois
Ray Kroc opened the Des Plaines restaurant in 1955. First day's revenues-$366.12! No
longer is a functioning restaurant, the Des Plaines building now a museum containing
McDonald's memorabilia and artifacts, including the Multimixer!
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Ray Kroc At Work
"If you've got time to lean, you've got time to clean," Ray Kroc preached to his troops.
Heeding his own words, here the Chairman of the Board cleans the parking lot of the
first McDonald's franchise in Des Plaines, Illinois.
Ronald McDonald, In Any Language He Means "Fun!"
"The smile known around the world," Ronald McDonald is second only to Santa Claus in
terms of recognition. In his first TV appearance in 1963 the happy clown was portrayed
by none other than Willard Scott.
Fred Turner And Ray Kroc, Architects Of A Dream
Here Ray Kroc (right) and Fred Turner study the design which would replace the red
and white tile buildings that had become landmarks throughout the U.S. Called Kroc's
first "grill man extraordinaire," Turner is today Senior Chairman of the Board.
McDonald's Comes To Wall Street
In 1965 McDonald's went public with the company's first offering on the stock exchange.
A hundred shares of stock costing $2,250 dollars that day would have multiplied into
74,360 shares today, worth over $2.8 million on December 31, 1998. In 1985
McDonald's was added to the 30-company Dow Jones Industrial Average.
A Big Idea Called "Big Mac"
Introduced system wide in 1968, the Big Mac was the brainchild of Jim Delligatti, one of
Ray Kroc's earliest franchisees, who by the late 1960s operated a dozen stores in
Pittsburgh
The Egg McMuffin
Introduced in 1973, the Egg McMuffin was developed by owner operator Herb Peterson
The First Ronald McDonald House
In Philadelphia, PA
In 1974 Fred Hill of the Philadelphia Eagles teamed up with McDonald's to create
Ronald McDonald House. Here the families of critically ill children have a place to call
home while they're away from home as the young patients undergo treatment for their
conditions.
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The Happy Meal
Since 1979 the Happy Meal has been making kids visits that much more special. Clubs
the world over collect Happy Meals toys and boxes.
Kuwait City, Kuwait
Kuwait City is pretty far from Des Plaines, Illinois, but that didn't stop 15,000 customers
from lining up here on opening day in 1994. The line at the drive thru was seven miles
long. Proving once again that "Good Times, great Taste" is understandable in any
language.
McDonald's On the Worldwide Web!
Forty three years after opening our first restaurant in Des Plaines, Illinois, we are proud
to come to you on the World Wide Web. Did you know that McDonalds.com receives
millions and millions of hits every week? Visit the
The Future Begins Now
McDonald's Express for a world that can't slow down!. McDonald's is popping up in
more non-traditional locations like Amoco and Chevron stations, with full menu offerings
and dining room seating, just like you'll find in a traditional McDonald's.
McDonald's Pakistan
McDonald’s Lahore is a joint venture between McDonald’s Corporation U.S.A and GAM
Corp (Pvt.) Ltd. on an equal stake, 50/50 basis. GAM Corp. is based in Lahore and
Mr. Ghouse Akbar, a dynamic and enterprising businessman, is the President and
C.E.O of the company.
The launch of the first McDonald’s restaurant in Lahore was met with unprecedented
enthusiasm and ebullience from the Lahories who are known for their liveliness, vigor
and penchant for quality food. Ever since then, there has been no looking back.
Consequently, in just over two years, 9 new McDonald’s restaurants have opened doors
in Lahore catering to all major areas in this vast metropolis. Our customers’ approval
and support has been tremendous through out this rapid growth period. Our diligent
team members have been working tirelessly to make this vision, a reality. But that’s not
all, after Lahore, McDonald’s made Golden Arches glitter in other cities of Pakistan.
Faisalabad is already open, soon to be followed by other cities. And this is only the
beginning. McDonald’s is firmly committed to give back to the community where we
operate. We are happy to become involved because we recognize that organizations
have a role to play in helping communities to work successfully. Even before we had
sold a single Big Mac in Lahore, we had donated for the construction of Chaman School
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a project for under-privileged children. The contribution we enjoy most is the experience
of working together with others in the community to achieve worthwhile benefits for
those who need it most.
Community Service
McDonald's is firmly committed to give back to the community where we operate. We
are happy to become involved because we recognize that organizations have a role to
play in helping communities to work successfully.
Even before we had sold a single Big Mac in Lahore, we had donated funds for the
construction of Chaman School, a project for under-privileged children. The contribution
we enjoy most is the experience of working together with others in the community to
achieve worthwhile benefits for those who need it most.
Unique Food
The three McMaza meals are Chatpata Chicken Roll, Chicken ' Chutni Burger and Spicy
Chicken Burger, all three are served with Aaloo fingers and a regular drink. The spicy
and tangy taste of the meals have been specially developed keeping in mind the local
palate. The combination of local taste and great value for the money makes these
meals very popular.
Branches in Pakistan
LAHORE MAIN BOULEVARD
The Country opening for McDonald’s was held in Lahore on September 19, 1998 amid
much excitement and fanfare on Gulberg’s Main Boulevard. In addition to introducing
the great McDonald’s taste to Lahore, McDonald’s first restaurant in Lahore also
introduced the concepts of a Play Place, a Party Room and the Drive-Thru.
63-Main Boulevard Gulberg II, Lahore
Tel: 5752132-575211
LAHORE LDA PLAZA
This restaurant opened on December 08, 1998 and is located on Egerton Road in the
heart of Lahore’s business district. Apart from a Play Place and a Party Room, this
restaurant also offers outdoor seating surrounded by a landscaped garden. Another
feature is the “McStop”, which caters to customers who want to eat and run without
going into the restaurant. L.D.A Plaza, Egerton Road, Lahore Tel: 6307997
LAHORE FORTRESS STADIUM
This restaurant, which opened on February 20, 1999, is considered to be one of the
most beautiful McDonald’s restaurants in Asia. The ceiling is covered by hand painted
murals created by students from the National College of Arts. The restaurant offers
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seating for 200 people including a first floor outdoor terrace overlooking the Fortress
Bridge and shopping strip. Features include a Play Place, a Party Room, and a Drive-
Thru. In addition, a 24 seat conference room with multi-media facilities is available for
daily rentals.
Fortress Stadium Cantt., Lahore
Tel: 6676674
LAHORE DEFENCE - Y BLOCK
McDonald's first authentically designed theme restaurant opened in Defence Y Block on
June 06, 1999. This cricket theme restaurant features a pavilion, 15 feet high wickets
and cricket memorabilia as wall hangings. Apart from having the largest Play Place of
any restaurant in Lahore, the restaurant is surrounded by 7 acres of lush green park
that includes a jogging track, fountains, a pond and spacious outdoor seating. The
restaurant offers a Party Room, a Drive-Thru and seating for 250 people.
486-B, Defence block Y, Phase III, Lahore
Tel: 5733826-7
LAHORE DEFENCE - PHASE I
This restaurant has made it even easier for shoppers to get mouthfuls of their favorite
food even between shopping and is centrally located in the high street commercial area
of Defence Phase 1. The restaurant is decorated by jazzy metal and steal alloy interior.
The second floor contains the popular Sindbad games. The area is exclusively designed
for children's enjoyment.
Defence 5-G,Phase 1 Commercial Zone, D.H.A, Lahore
Tel: 5725561-2
LAHORE MODEL TOWN LINK ROAD
The last day of the millennium witnessed the Grand Opening of the 6th McDonald's in
Lahore. The new 150 seated freestanding structure was unveiled at Model Town Link
Road. This showcase restaurant has an exclusive Party Room and the ever-popular
Play Place.
Block # 23, Phase II, GECH Society, Link Road, Model Town, Lahore
Tel: 5171327-8
LAHORE JAIL ROAD SHADMAN
McDonald's Jail road is situated right opposite the lovely Race Course Park and in the
middle of all the famous colleges of Lahore. It is a double story restaurant with a seating
capacity of 85 people. The interior color scheme of the store is in cool shades of mauve
and blue with brightly colored Murrells on the two main walls. As our main customers
are from our nearby colleges, the dinning area walls have been decorated with lovely
photographs of the college buildings. The restaurant is mostly flooded with young
people, so to cater to their demands we have a huge collection of latest Urdu and
English songs stored in our Juke Box. There is a takeaway window facing the park.89-
B, Jail Road, Lahore
Tel: 7532056-8
LAHORE ALLAMA IQBAL TOWN
McDonald's AIT is located in the heart of Allama Iqbal Town. The strategic location
helps it to cater to a large number of surrounding residential areas and because of this it
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has become purely a family restaurant. These families belong to different social classes,
majority consisting of small business owners. The restaurant is positioned in way that it
blends into the local culture, meeting with the local life styles. The interior is decorated
with pictures of skyscrapers of America. The pictures also show the tall buildings being
constructed and cleaned. Keeping up with the decorative theme McDonalds AIT has a
unique play place known as McSky Tubes. This Hanging-on-the-roof play place is the
only one in Pakistan, which is loved by kids for it allows them to climb up the play-place
all the way to the roof. The seating capacity of the store is for 97 people.
13th Kashmir Block, Moon Market, Allama Iqbal Town, Lahore
Tel: 7846757, 7840051
LAHORE BANK SQUARE
McDonald's Bank Square was opened on January 5th 2001. It is named after its
location as it is situated in the middle of Bank Square on the Mall road. Many branches
of local and foreign banks surround the restaurant. The restaurant caters to the
surrounding offices and also to the famous colleges like Government College, King
Edward Medical College, NCA and Punjab University. The historical Anarkali bazaar is
also on walking distance from our restaurant.
The decorative theme of the restaurant is displayed through pictures of renowned
colleges and historical buildings that are situated on the Mall road. The restaurant has a
seating capacity of 101 people.
1, Robert Road, Bank Square, The Mall, Lahore
Tel: 7211223-5
FAISALABAD SATIANA ROAD
McDonald’s Faisalabad was opened on 29th
June 2001. The restaurant is ideally located
on the link of D-ground and Satiana Road, Peoples Colony. This colony is also the
prime residential area for the affluent. It is a corner-to-corner 100% free standing
location with a drive thru and play place. It has a seating capacity 132 people. The car
parking can accommodate about 23 cars. One of Faisalabad’s largest neon signs glows
at night to remind customers of the McDonald's experience.
329/330 Satiana Road, Faisalabad
Tele: 041-734812&3
FAISALABAD SINDBAD
We opened our smallest restaurant in the system on 16th November 2001. The
restaurant is located within Sindbad, a Children Playland in Faisalabad. The restaurant
is specially designed and decorated for our special customers, children and their
families. The total covered area is 1000 Sq-Ft with a seating capacity of 40 people. The
restaurant’s decoration theme is McDonald’s characters which are wall painted as
Mural. Children love coming to play and eat in this colorful and fun filled restaurant.
McDonald’s Sindbad, Iqbal Stadium, Faisalabad
Tele: 041-634451 & 2
FAISALABAD LIAQAT ROAD
On the last day of the year Faisalabad witnessed the grand opening of the 3rd
restaurant in Faisalabad. It is a freestanding location with a Drive-thru. The covered
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area is 3000 Sq-ft with a seating capacity of 80 people and has an exclusive area as
Party Room/ Family Room. The Store outlook is quite unique with the introduction of
Airlock Entrances and Enhanced Drive thru Booths, which open up the view of the
booth and the crewmember to the driver. This is more customer friendly and allows the
crew to make visual contact with the customer earlier. McDonald’s has also developed
the Green belts and a Fountain in the roundabout area, which has totally changed the
appearance of the surrounding Road intersection. Inside the restaurant is decorated
with wall paintings of renowned artists depicting textiles, the main business of
Faisalabad.
1-Liaqat Road, Chiniot Bazar, Civil Lines, Faisalabad
Tele # : 041-622278 & 9
McDONALD'S REPORTS GLOBAL RESULTS
OAK BROOK, IL -- McDonald's Corporation today announced global results for the
quarter and nine months ended September 30, 2002.
• Diluted earnings per share were $0.38 for the quarter.
• Total revenues were $4.0 billion for the quarter and $11.5 billion for the nine months,
up 3% and 4%, respectively, in constant currencies.
• Systemwide sales totaled $10.9 billion for the quarter and $31.0 billion for the nine
months, up 1% and 2%, respectively, in constant currencies.
• During the quarter, McDonald's repurchased $154 million of its stock.
• McDonald’s announced a reallocation of capital spending for 2003, with a focus on
building sales at existing restaurants and dramatically reducing traditional
McDonald's restaurant additions to about 600.
Key highlights – Consolidated
Dollars in millions, except per
common share data
Percent
Increase/(Decrease)
Quarters ended September 30 2002 2001
As
Reported
Constant
Currency*
Systemwide sales $10,908.1 $10,629.2 3 1
Total revenues 4,047.0 3,879.3 4 3
Operating income 829.8 746.6 11 6
Net income 486.7 545.5 (11) (14)
Net income per common share diluted 0.38 0.42 (10) (12)
Nine months ended September 30
Systemwide sales $31,036.5 $30,517.7 2 2
Total revenues 11,506.5 11,098.5 4 4
Operating income 2,316.3 2,214.3 5 3
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Income before cumulative effect of
accounting change 1,335.9 1,364.7 (2) (4)
Cumulative effect of accounting
change, net of tax (98.6) - n/m n/m
Net income 1,237.3 1,364.7 (9) (11)
Per common share – diluted:
Income before cumulative effect of
accounting change
Cumulative effect of accounting
change
Net income
1.04
(0.08)
0.96
1.04
-
1.04
-
n/m
(8)
(2)
n/m
(10)
* Information in constant currencies excludes the effect of foreign currency translation on reported results, except
for hyperinflationary economies, whose functional currency is the U.S. Dollar. Constant currency results are
calculated by translating the current year results at prior year monthly average exchange rates.
n/m Not meaningful
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SUMMARY COMMENTARY
Jack M. Greenberg, Chairman and Chief Executive Officer, said, “Excluding the impact
of 2002 and 2001 special items(1)
, nine month 2002 diluted income per common share
before the cumulative effect of the accounting change increased 5% to $1.07.
“This year certainly has proven to be even more challenging than we had
anticipated. Yet, we are seeing continued momentum in some areas of our business
and some improvement in other areas, as we continue to respond to changing
worldwide economic and competitive environments. For example, our performance in
France continues to be strong. In the U.S., we’ve seen improvements in our customers’
drive-thru experience, as determined by an independent research study, as well as in
our mystery shop scores. More recently, we’ve seen an improvement in U.S. sales in
conjunction with the start of our national value campaign that began on October 4. In
Brazil, we generated positive comparable sales each month throughout the quarter,
giving us the strongest quarterly sales performance in years.
“In addition, we firmly believe that there are untapped growth opportunities for
our existing McDonald’s restaurant business. We have always focused on achieving
appropriate returns on each and every dollar invested. In today’s world, it’s even more
critical that we do so.
“Accordingly, we are taking significant actions to optimize our business in the
current operating environment. First, we will dramatically reduce restaurant openings in
2003 and focus more of our considerable financial resources on our existing business in
order to drive comparable sales growth, increase cash from operations and improve
returns. Second, we are currently reviewing our G&A spending and are committed to
limiting G&A growth to a rate less than half that of Systemwide sales growth in 2003.
This is notable, as we plan to achieve this while increasing G&A spending on
technology that is designed to further leverage our size in order to increase efficiency
and effectiveness, while supporting future growth.
"We expect total capital expenditures of approximately $1.9 billion in 2003, which
is about $100 million less than expected in 2002. This reflects a reduction in capital
spent on new restaurant openings around the world of almost $500 million. We plan to
invest nearly $100 million of this capital savings in new buildings for U.S. franchised
restaurants in 2003, in order to give our best owner/operators additional financial
flexibility to purchase more restaurants as well as to reinvest in their existing
restaurants. This is in contrast to the past few years when U.S. owner/operators had
the option to own new restaurant buildings. As a result of this change, the Company will
collect additional rent and earn a good return. In addition, we plan to reallocate
approximately $300 million of the $500 million in capital savings primarily to increase
reinvestments in existing restaurants.
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“In 2003, we expect to add about 600 net traditional McDonald’s restaurants
globally, 450 fewer than this year, and down dramatically from a high of nearly 2,000
traditional restaurant additions in 1996. In addition, we plan to add 150 to 175 net
Partner Brand restaurants in 2003. In 2002, we expect to add approximately 1,300 net
McDonald’s restaurants, including 250 satellites, and about 90 net Partner Brand
restaurants. The increase in Partner Brand additions in 2003 includes a doubling of
Chipotle restaurant openings, as the concept continues to deliver strong comparable
sales and excellent returns and has impressive customer brand loyalty.
“During 2003, we will continue to concentrate McDonald’s restaurant openings in
markets with solid returns and will significantly reduce the amount of capital we invest in
Asia/Pacific/Middle East/Africa (APMEA) and Latin America, where returns have been
pressured in recent years by weak economies. At the same time, we plan to
significantly reduce traditional McDonald’s restaurant openings in the U.S., and
somewhat in Europe, and to increase investments in existing U.S. restaurants to boost
comparable sales.
“Operationally, in the U.S. we continue to focus on improving our customers’
experiences with our Restaurant Operations Improvement Process, great everyday
value and increased menu flexibility. We will complete the national rollout of our Dollar
Menu next month and continue to run our first sustained national price-point advertising
message in more than five years. The recent results we have seen from these
initiatives give us confidence that sales will build as we create increased demand for
Brand McDonald’s.
“In Europe, we continue to attract customers with a combination of taste, value
and service initiatives. In addition to continued strong performance in France, we have
increased our market share against our major competitors in the U.K. And in Germany,
we have maintained our share against our major competitors in the face of an overall
decline in the country’s informal eating-out market.
“We continue to target 2002 annual earnings per share of $1.43 or better
excluding special charges(1)
. Achieving this target will require a significant improvement
in sales trends. Including the charges, our earnings per share target is $1.31 or better.
This reflects a foreign currency translation benefit of two to three cents.
- 17 -

“Going forward, we expect to benefit from the many actions we are taking. The
level of comparable sales growth we generate and the judicious management of costs
and capital spending will determine our success. Our primary focus will be optimizing
our existing business, growing cash from operations and improving returns. This will
include increasing our investments in existing restaurants to drive comparable sales,
investing in new restaurants that generate attractive returns, investing in technology to
improve long-term performance, and growing our existing Company-operated restaurant
base as appropriate. The level of growth in cash from operations will depend on our
operating performance and interest, tax and foreign currency exchange rates, as well as
working capital needs.
“McDonald’s remains in a strong financial position, with solid credit ratings.
During the quarter, we repurchased $154 million of our stock, bringing year-to-date
share repurchases to $620 million. In 2003, we plan to repurchase at least $500 million
of McDonald’s stock.
“Also, today, McDonald’s Board of Directors approved a 4.4 percent increase in
the annual dividend to 23.5 cents per share, payable on December 2, 2002 to
shareholders of record on November 15, 2002.”
(1) See "Cumulative Effect of Accounting Change" and "Special Items" sections on page 6.
- 18 -

OPERATING RESULTS
The Company operates in the food service industry
and primarily operates quick-service restaurant
businesses under the McDonald’s brand. To capture
additional meal occasions, the Company also
operates other restaurant concepts under its Partner
Brands: Boston Market, Chipotle and Donatos
Pizzeria. In addition, McDonald's has a minority
ownership in Pret A Manger. In March 2002, the
Company sold its Aroma Café business in the U.K.
Impact of Foreign Currencies on Reported Results
While changing foreign currencies affect reported results, McDonald's lessens
exposures, where practical, by financing in local currencies, hedging certain foreign-
denominated cash flows and by purchasing goods and services in local currencies.
Foreign currency translation had a positive impact on the total revenues growth
rate for the quarter primarily due to the stronger Euro and British Pound, partly offset by
weaker Latin American currencies (primarily the Argentine Peso, Brazilian Real and
Venezuelan Bolivar). For the nine months, foreign currency translation had a minimal
impact on the total revenues growth rate as the stronger Euro and British Pound were
offset primarily by the weaker Latin American currencies. Foreign currency translation
had a positive impact on the consolidated operating income growth rate for both periods
primarily due to the stronger Euro.
See the following table for the effect of foreign currency translation on
consolidated reported results for the quarter and nine months.
Effect of foreign currency translation on
consolidated reported results – positive/
(negative)
In millions, except per common share data
Quarter ended
September 30, 2002
Nine months ended
September 30, 2002
Total revenues $55.5 $(44.6)
Operating income 35.6 45.4
Net income 17.0 19.3
Net income per common share – diluted 0.01 0.02
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Cumulative Effect of Accounting Change
Effective January 1, 2002, the Company adopted SFAS No. 142 “Goodwill and
Other Intangible Assets,” which eliminates the amortization of goodwill and instead
subjects it to annual impairment tests. As a result of the initial required goodwill
impairment test, the Company recorded a non-cash charge of $98.6 million after tax in
first quarter 2002 to reflect the cumulative effect of this accounting change. The
impaired goodwill was primarily in Argentina, Uruguay and other markets in Latin
America and the Middle East, where economies have weakened significantly over the
last several years.
Special Items
In first quarter 2002, the Company recorded $43.0
million (pre and after tax) of non-cash asset
impairment charges in other operating expense,
primarily related to the impairment of assets in
existing restaurants in Chile and other Latin American
markets and the closing of 32 underperforming
restaurants in Turkey, as a result of continued
economic weakness.
In second quarter 2001, the Company recorded a $24.0 million (pre and after tax)
non-cash asset impairment charge in other operating expense due to an assessment of
the ongoing impact of Turkey's significant currency devaluation on our business.
In third quarter 2001, the Company recorded charges of $84.1 million
($63.9 million after tax) primarily related to the closing of 154 underperforming
restaurants in international markets and $17.4 million ($12.1 million after tax) primarily
related to the write-off of certain technology investments in other operating expense. In
addition, the Company recorded the following nonoperating items: a $12.4 million
($8.1 million after tax) charge primarily related to the write-off of a corporate investment
and a $137.1 million (pre and after tax) gain related to the initial public offering of
McDonald’s Japan. The gain reflected an increase in the carrying value of our
investment as a result of the cash proceeds from the IPO received by McDonald’s
Japan.
See the following table for a reconciliation of reported results to adjusted
results excluding special items.
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Reconciliation of reported results
to adjusted results excluding
special items
Dollars in millions, except per
common share data
Income Before
Cumulative Effect of
Accounting Change
Net Income
Per Common Share –
Diluted, Before
Cumulative Effect of
Accounting Change
%Inc/
(Dec) 2002 2001
%Inc/
(Dec)
As reported $ 486.7 $ 545.5 (11) $0.38 $0.42 (10)
McDonald’s Japan IPO gain (137.1) (.10)
Charges for underperforming
restaurant closings 63.9 .05
Technology write-off and other
charges 12.1 .01
Corporate investment write-off 8.1
Total special items (53.0) (.04)
Adjusted $ 486.7 $ 492.5 (1) $0.38 $0.38 -
As reported $1,335.9 $1,364.7 (2) $1.04 $1.04 -
McDonald’s Japan IPO gain (137.1) (.10)
Charges for underperforming
restaurant closings 63.9 .05
Asset impairment charges 43.0 24.0 .03 .02
Technology write-off and other
charges 12.1 .01
Corporate investment write-off 8.1
Total special items 43.0 (29.0) .03 (.02)
Adjusted $1,378.9 $1,335.7 3 $1.07 $1.02 5
Net Income and Diluted Net Income Per Common Share
For the quarter, net income declined $58.8 million or 11% and diluted net income
per common share declined $0.04 or 10%. However, third quarter 2001 results included
special items totaling $53.0 million or $0.04 per share of income.
For the nine months, income before the cumulative effect of an accounting
change declined $28.8 million or 2% and diluted income per common share before the
cumulative effect of this accounting change was flat at $1.04. Results for the nine
months 2002 included special charges of $43.0 million or $0.03 per share and results
for the nine months 2001 included special items totaling $29.0 million or $0.02 of
income per share.
- 21 -

As previously mentioned, the Company adopted the new goodwill accounting
rules on January 1, 2002, resulting in a first quarter 2002 non-cash charge of
$98.6 million after tax to reflect the cumulative effect of this accounting change. For the
nine months, net income, which included the charge for the cumulative effect of the
accounting change, declined $127.4 million or 9% and diluted net income per share
declined $0.08 or 8%.
Weighted average shares outstanding for both periods were lower compared with
the prior year due to shares repurchased. In addition, outstanding stock options had a
less dilutive effect than in the prior year. During the nine months, the Company
repurchased 23.1 million shares of its common stock for approximately $620 million.
Systemwide Sales and Total Revenues
Systemwide sales include sales by all restaurants, whether operated by the
Company, by franchisees or by affiliates operating under joint-venture agreements.
Management believes that Systemwide sales are useful in analyzing the Company’s
revenues because franchisees and affiliates pay rent, service fees and/or royalties that
generally are based on a percent of sales with specified minimum payments, along with
initial fees. These fees received from franchisees and affiliates along with sales from
Company-operated restaurants are reported as revenues.
Systemwide sales
Percent
Dollars in millions Increase/(Decrease)
As
Reported
Constant
Currency*
U.S. $ 5,203.4 $ 5,206.5 - n/a
Europe 2,846.7 2,520.2 13 3
APMEA 1,829.9 1,828.6 - (2)
Latin America 357.7 431.4 (17) 8
Canada 400.5 391.5 2 3
Partner Brands 269.9 251.0 8 8
Total Systemwide sales $10,908.1 $10,629.2 3 1
U.S. $15,249.0 $15,071.6 1 n/a
Europe 7,707.5 6,969.6 11 7
APMEA 5,085.3 5,344.9 (5) (3)
Latin America 1,107.7 1,318.4 (16) 2
Canada 1,098.5 1,094.5 - 2
Total Systemwide sales $31,036.5 $30,517.7 2 2
* Excluding the effect of foreign currency translation on reported results.
n/a Not applicable
- 22 -

Systemwide sales and revenues may grow at different rates during a given
period, primarily due to a change in the mix of Company-operated, franchised and
affiliated restaurants. For example, mix is impacted by purchases and sales of
restaurants between the Company and franchisees.
For the nine months ended September 30, 2002, about 30% of Systemwide
sales was generated by Company-operated restaurants, while 75% of revenues was
generated by Company-operated restaurants.
Total revenues
Percent
Dollars in millions Increase/(Decrease)
As
Reported
Constant
Currency*
U.S. $ 1,408.1 $ 1,390.8 1 n/a
Europe 1,380.7 1,267.5 9 -
APMEA 623.7 576.7 8 5
Latin America 201.2 241.3 (17) 13
Canada 172.9 161.3 7 8
Total revenues $ 4,047.0 $ 3,879.3 4 3
U.S. $ 4,076.3 $ 4,060.8 - n/a
Europe 3,789.1 3,518.1 8 4
APMEA 1,788.0 1,631.6 10 9
Latin America 619.4 739.1 (16) 6
Canada 473.7 458.7 3 5
Total revenues $11,506.5 $11,098.5 4 4
* Excluding the effect of foreign currency translation on reported results.
n/a Not applicable
On a global basis, the increases in sales and revenues for the quarter and nine
months were due to restaurant expansion, partly offset by negative comparable sales.
On a constant currency basis, revenues increased at a higher rate than sales primarily
due to significantly lower sales from our affiliate in Japan. Under our affiliate structure,
we record a royalty in revenues based on a percentage of Japan’s sales, whereas all of
Japan’s sales are included in Systemwide sales. For this reason, Japan’s sales decline
had a larger negative impact on Systemwide sales than on revenues.
U.S. sales were relatively flat for the quarter as expansion was offset by negative
comparable sales, while U.S. sales increased for the nine months as expansion more
than offset negative comparable sales. U.S. revenues increased for the quarter due to
an increase in the Company-operated restaurant base and were relatively flat for the
nine months.
- 23 -

In Europe, constant currency sales increased for the quarter due to expansion,
partly offset by negative comparable sales, while Europe’s sales for the nine months
increased due to expansion and positive comparable sales. Strong results in France
were partly offset in both periods by negative comparable sales in Germany, where the
economy continues to contract, and negative comparable sales in the U.K. for the
quarter. Our marketing messages in Germany and the U.K. during the quarter did not
resonate as well with consumers as we had hoped. Further, we expect the difficult
economic conditions in Germany to continue in the near term. Europe’s revenue growth
rates were lower than the sales growth rates for both periods primarily due to a higher
percentage of franchised restaurants in 2002, compared with 2001.
Constant currency sales results in APMEA declined for both periods
due to negative comparable sales, partly offset by expansion. Positive
comparable sales in Australia and expansion in China were more than
offset by negative comparable sales in Japan in part due to weak economic
conditions and consumer concerns regarding food safety. We expect
Japan’s results in the near term to continue to be weak. Despite a
decrease in sales, APMEA’s constant currency revenues increased for the
quarter and nine months primarily due to a higher percentage of Company-
operated restaurants and our affiliate structure in Japan. In addition,
APMEA’s revenues for the nine months benefited from a restructuring of
our ownership in the Philippines in July 2001 that resulted in the
reclassification of restaurants and related revenues from franchised to
Company-operated.
In Latin America, constant currency sales increased for both periods
primarily due to positive comparable sales in Brazil and expansion.
Revenues increased at a higher rate than sales for both periods partly due
to a shift to a higher percentage of Company-operated restaurants in 2002.
The sales and revenues increases in Partner Brands for both periods
were due to expansion and positive comparable sales.
Combined Operating Margins
The following combined operating margin information represents margins for
McDonald’s restaurant business only and excludes Partner Brands.
- 24 -

Combined operating
margins
Quarters ended
September 30
Nine months ended
September 30
2002 2001 2002 2001
Dollars in millions
Company-operated $ 416.6 $ 419.2 $ 1,163.6 $ 1,164.5
Franchised 812.9 798.6 2,315.4 2,269.8
Combined operating margins $ 1,229.5 $ 1,217.8 $ 3,479.0 $ 3,434.3
Percent of sales/revenues
Company-operated 15.1% 15.9% 14.9% 15.4%
Franchised 79.2 79.7 78.8 79.1
Combined operating margin dollars increased $11.7 million or 1% for the quarter
(2% decrease in constant currencies) and $44.7 million or 1% for the nine months
(1% in constant currencies). The U.S. and Europe segments accounted for more than
80% of the combined margin dollars for both periods.
Consolidated food & paper costs decreased as a
percent of sales for the quarter and nine months,
while payroll costs and occupancy & other operating
expenses increased as a percent of sales for both
periods.
The U.S. Company-operated margin percent
decreased for the quarter and increased for the nine
months. As a percent of sales, food & paper costs
and occupancy & other operating expenses decreased
for both periods, while payroll costs increased. In
addition, both periods benefited from the elimination
of goodwill amortization and a lower contribution rate
to the national co-op for advertising expenses.
However, these benefits were more than offset by
higher labor costs for the quarter.
The Company-operated margin percent in Europe
decreased for the quarter, primarily due to negative
comparable sales, and also decreased for the nine months.
Payroll costs as a percent of sales increased in both periods.
Company-operated margins as a percent of sales in APMEA
- 25 -

and Latin America were relatively flat for the quarter but
decreased for the nine months.
The declines in the consolidated franchised margin
percent for the quarter and nine months reflect negative
comparable sales and higher occupancy costs due to an
increased number of leased sites. The franchised margin
percent in APMEA increased for the nine months
primarily due to the restructuring of our ownership in the
Philippines in July 2001. The restructuring resulted in the
reclassification of our restaurants and related margins, that
were lower than the average for the segment, from
franchised to Company-operated.
Selling, General & Administrative Expenses
Selling, general &
administrative expenses increased 5% for the quarter on both a reported and constant
currency basis and were relatively flat for the nine months (1% increase in constant
currencies). Both periods reflected higher spending on future restaurant-related
technology improvements, as well as the benefit of the global change initiatives
introduced in late 2001. The nine months also included a reduction in certain
performance-based compensation accruals.
Other Operating Income (Expense), Net
Other operating income (expense), net
Dollars in millions
Quarters ended
September 30
Nine months ended
September 30
2002 2001 2002 2001
Gains on sales of restaurant businesses $ 38.1 $ 21.0 $ 78.5 $ 67.3
Equity in earnings of unconsolidated affiliates 14.1 13.6 29.5 50.6
Team service system payments – U.S. (21.6)
Other expense (32.2) (5.7) (36.4) (24.3)
Special items:
Underperforming restaurant closings (84.1) (84.1)
Asset impairment (43.0) (24.0)
Technology write-off and other charges (17.4) (17.4)
Total $ 20.0 $ (72.6) $ 7.0 $ (31.9)
Equity in earnings of unconsolidated affiliates included lower earnings from
our Japanese affiliate for both periods. The team service system payments consist
of payments made to U.S. owner/operators in first quarter 2002 to facilitate the
introduction of a new front counter team service system. Other expense increased
for both periods primarily due to higher provisions for uncollectible receivables
- 26 -

and higher losses on property dispositions, partly offset by a benefit from the
elimination of goodwill amortization.
Operating Income
Consolidated operating income increased $83.2 million or 11% for the quarter,
however, special charges of $101.5 million were included in third quarter 2001 operating
income. Consolidated operating income increased $102.0 million or 5% for the nine
months. Special charges of $43.0 million were included in operating income for the
nine months 2002 and $125.5 million of special charges were included for the nine
months 2001. See the table at the end of this release for a reconciliation of reported
operating income to adjusted constant currency operating income excluding special
items.
- 27 -

Operating income Percent Increase/
(Decrease)
As
Reported
Adjusted
Constant
Currency(1)
U.S. $ 479.9 $ 479.3 - -
Europe (2)
336.3 288.0 17 (5)
APMEA (3)
84.2 75.8 11 (8)
Latin America (4)
6.7 (22.3) n/m (75)
Canada (5)
39.3 34.7 13 2
Partner Brands (10.1) (10.4) 3 3
Corporate (6)
(106.5) (98.5) (8) (26)
Total operating income $ 829.8 $ 746.6 11 (6)
U.S. $1,400.0 $1,370.4 2 2
Europe (2)
877.7 775.0 13 4
APMEA (3)
229.6 261.1 (12) (18)
Latin America (4)
(2.7) 14.2 n/m (70)
Canada (5)
104.8 98.6 6 4
Partner Brands (28.7) (37.8) 24 24
Corporate (6)
(264.4) (267.2) 1 (5)
Total operating income $2,316.3 $2,214.3 5 (1)
(1) Excluding the effect of foreign currency translation on reported results and excluding
the special items listed below.
(2) Includes $36.2 million of charges in third quarter 2001 related to the closing of
underperforming restaurants.
(3) Includes asset impairment charges in Turkey of $15.9 million in first quarter 2002
and $24.0 million in second quarter 2001, and $11.4 million of charges in third
quarter 2001 primarily related to the closing of underperforming restaurants.
(4) Includes $27.1 million of asset impairment charges in first quarter 2002 and $35.4
million of charges in third quarter 2001 related to the closing of underperforming
restaurants.
(5) Includes $4.2 million of charges in third quarter 2001 related to the closing of
underperforming restaurants.
(6) Includes $14.3 million of charges in third quarter 2001 primarily related to the write-
off of certain technology investments.
n/m Not meaningful
U.S. operating income was relatively flat for the quarter. Lower combined
operating margin dollars were offset by lower selling, general & administrative expense
and higher other operating income. For the nine months, U.S. operating income
increased 2% due to higher combined operating margin dollars and lower selling,
general & administrative expenses. Other operating income was lower for the nine
months due to the $21.6 million of payments made to U.S. owner/operators for the front
counter team service system.
- 28 -

Europe’s adjusted operating income decreased 5% for the quarter and increased
4% for the nine months in constant currencies. Both periods reflect strong results in
France and weak results in Germany. In addition, the U.K. contributed to the increase
for the nine months.
APMEA’s adjusted operating income decreased 8% for the quarter and 18% for
the nine months in constant currencies, primarily due to weak results in Japan and
Hong Kong, partly offset by strong results in Australia for both periods. The segment’s
growth rate for the nine months was also negatively impacted by a gain on the sale of
real estate in Singapore in first quarter 2001.
Latin America’s adjusted operating results declined significantly for the quarter
and nine months as Argentina and most other markets continue to experience difficult
economic conditions.
The increases in operating income for Partner Brands were primarily driven by
improved results for Chipotle and the elimination of goodwill amortization for both
periods.
INTEREST, NONOPERATING EXPENSE AND INCOME TAXES
Interest expense decreased for both periods primarily due to lower average
interest rates, partly offset by higher average debt levels.
Nonoperating expense for both periods reflected
foreign currency translation losses in 2002 compared
with foreign currency translation gains in 2001. In
addition, nonoperating expense in 2001 included a
write-off of a corporate investment.
The effective income tax rate increased from 27.3% in 2001 to 32.0%
in 2002 for the quarter and from 30.4% in 2001 to 32.7% in 2002 for the
nine months due to the following special items that were not tax-effected
for financial reporting purposes: the Turkey asset impairment charge
recorded in second quarter 2001, the Japan IPO gain and certain
restaurant closing charges recorded in third quarter 2001, and the asset
impairment charges recorded in first quarter 2002. We expect the annual
2002 effective tax rate to be about 32.5% to 33.0%.
FORWARD-LOOKING STATEMENTS
Certain forward-looking statements are included in
this release. They use such words as "may," "will,"
"expect," "believe," "plan" and other similar
terminology. These statements reflect management's
current expectations regarding future events and
- 29 -

operating performance and speak only as of the date
of this release. These forward-looking statements
involve a number of risks and uncertainties. The
following are some of the factors that could cause
actual results to differ materially from those
expressed in or underlying our forward-looking
statements: the effectiveness of operating and
technology initiatives and advertising and promotional
efforts, as well as changes in: global and local
business and economic conditions; currency
exchange and interest rates; food, labor and other
operating costs; political or economic instability in
local markets; competition; consumer preferences,
spending patterns and demographic trends;
legislation and governmental regulation; and
accounting policies and practices. The foregoing list
of important factors is not exclusive.
The Company undertakes no obligation to
publicly update or revise any forward-looking
statements, whether as a result of new information,
future events or otherwise.
RELATED COMMUNICATIONS
In conjunction with its third quarter earnings release, McDonald's Corporation will
broadcast its conference call with members of management live over the Internet at
10:30 a.m. Central Time. Interested parties are invited to listen by logging on to
http://www.mcdonalds.com/corporate/investor and selecting “Webcasts."
- 30 -

McDONALD'S CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Dollars and shares in millions, except per common share data
--------------------------------------------------------------
------
Inc/(Dec)
Quarters ended September 30, 2002 2001 $
%
--------------------------------------------------------------
------
Revenues
Sales by Company-operated
restaurants $3,019.3 $2,876.9 142.4
5
Revenues from franchised
and affiliated restaurants 1,027.7 1,002.4 25.3
3
TOTAL REVENUES 4,047.0 3,879.3 167.7
4
Operating costs and expenses
Company-operated restaurants 2,584.8 2,440.8 144.0
6
Franchised restaurants
--occupancy costs 214.2 203.4 10.8
5
Selling, general &
administrative expenses 438.2 415.9 22.3
5
Other operating (income)
expense, net (20.0) 72.6
(92.6) n/m
Total operating costs
and expenses 3,217.2 3,132.7 84.5
3
OPERATING INCOME 829.8 746.6 83.2
11
Interest expense 93.8 110.6
(16.8) (15)
McDonald’s Japan IPO gain - (137.1) 137.1
n/m
Nonoperating expense, net 20.7 22.6
(1.9) (8)
Income before provision
for income taxes 715.3 750.5
(35.2) (5)
S: HODeptInvestorRelationsinvestor3Q02ER.doc - 31 - 9/11/2015 16:54 A9/P9

Provision for income taxes 228.6 205.0 23.6
12
NET INCOME 486.7 545.5
(58.8) (11)
NET INCOME PER
COMMON SHARE-DILUTED $ 0.38 $ 0.42*
(0.04) (10)
Weighted average common
shares outstanding-diluted 1,280.5 1,305.8
n/m Not meaningful
* Diluted earnings per share would have remained at $0.42 had SFAS 142
been adopted in 2001.

McDONALD'S CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Dollars and shares in millions, except per common share data
--------------------------------------------------------------
------
Inc/(Dec)
Nine months ended September 30, 2002 2001 $
%
--------------------------------------------------------------
------
Revenues
Sales by Company-operated
restaurants $ 8,566.8 $ 8,229.3 337.5
4
Revenues from franchised
and affiliated restaurants 2,939.7 2,869.2 70.5
2
TOTAL REVENUES 11,506.5 11,098.5 408.0
4
Operating costs and expenses
Company-operated restaurants 7,348.3 7,025.8 322.5
5
Franchised restaurants
--occupancy costs 622.9 598.2 24.7
4
Selling, general &
administrative expenses 1,226.0 1,228.3
(2.3) -
Other operating (income)
expense, net (7.0) 31.9
(38.9) n/m
Total operating costs
and expenses 9,190.2 8,884.2 306.0
3
OPERATING INCOME 2,316.3 2,214.3 102.0
5
Interest expense 279.5 348.6
(69.1) (20)
McDonald’s Japan IPO gain - (137.1) 137.1
n/m
Nonoperating expense, net 53.1 42.6 10.5
25
Income before provision
for income taxes and
cumulative effect of
accounting change 1,983.7 1,960.2 23.5
1

Provision for income taxes 647.8 595.5 52.3
9
Income before cumulative
effect of accounting change 1,335.9 1,364.7
(28.8) (2)
Cumulative effect of
accounting change, net
of tax (98.6) -
(98.6) n/m
NET INCOME $ 1,237.3 $ 1,364.7
(127.4) (9)
PER COMMON SHARE-DILUTED:
Income before cumulative
effect of accounting change $ 1.04 $ 1.04* -
-
Cumulative effect of
accounting change $ (0.08) $ -
(0.08) n/m
Net income $ 0.96 $ 1.04
(0.08) (8)
Weighted average common
shares outstanding-diluted 1,286.8 1,313.4
n/m Not meaningful
* Diluted earnings per share would have been $1.06 had
SFAS 142
been adopted in 2001.

McDONALD'S SYSTEMWIDE SALES
Dollars in millions
--------------------------------------------------------------
----------
% Inc/
(Dec)
As
Constant
Quarters ended September 30, 2002 2001 Reported
Currency*
--------------------------------------------------------------
----------
U.S.
Operated by franchisees $ 4,105.3 $ 4,104.8 -
Operated by the Company 827.2 802.9 3
Operated by affiliates 270.9 298.8 (9)
5,203.4 5,206.5 -
n/a
Europe
Operated by franchisees 1,623.1 1,412.3 15
Operated by the Company 1,065.6 992.4 7
Operated by affiliates 158.0 115.5 37
2,846.7 2,520.2 13
3
APMEA
Operated by franchisees 555.0 521.3 6
1,829.9 1,828.6 -
(2)
Latin America
Operated by franchisees 173.8 218.0 (20)
Operated by the Company 171.9 204.6 (16)
357.7 431.4 (17)
8
Canada
400.5 391.5 2
3
Partner Brands
269.9 251.0 8
8

Systemwide
Operated by the Company 3,019.3 2,876.9 5
Operated by affiliates 1,173.5 1,267.0 (7)
$10,908.1 $10,629.2 3
1
* Excluding the effect of foreign currency translation on
reported
results.
n/a Not applicable

McDONALD'S SYSTEMWIDE SALES
Dollars in millions
--------------------------------------------------------------
----------
% Inc/
(Dec)
As
Constant
Nine months ended September 30, 2002 2001 Reported
Currency*
--------------------------------------------------------------
----------
U.S.
Operated by franchisees $12,072.8 $11,845.5 2
Operated by the Company 2,368.5 2,365.6 -
15,249.0 15,071.6 1
n/a
Europe
7,707.5 6,969.6 11
7
APMEA
5,085.3 5,344.9 (5)
(3)
Latin America
Operated by franchisees 554.2 674.8 (18)
Operated by the Company 524.7 624.9 (16)
1,107.7 1,318.4 (16)
2
Canada
Operated by franchisees 679.6 680.7 -
1,098.5 1,094.5 -
2
Partner Brands
788.5 718.7 10
10

Systemwide
$31,036.5 $30,517.7 2
2
reported
results.
n/a Not applicable

McDONALD'S COMPARABLE SALES
McDONALD’S RESTAURANT BUSINESS*
--------------------------------------------------------------
-----------
Percent Increase/(Decrease)
Quarters ended Nine months ended
September 30 September 30
2002 2001 2002
2001
--------------------------------------------------------------
-----------
U.S. (2.8) 0.6 (1.6)
(0.1)
Europe (1.3) (1.2) 2.0
(2.8)
APMEA (8.1) (4.2) (9.2)
(3.5)
Latin America 3.6 (3.3) (2.1)
(2.4)
Canada (0.9) (0.1) (2.0)
1.4
Brand McDonald’s (3.0) (0.9) (2.1)
(1.4)
* Comparable sales represent the percent change in constant currency
sales from the same period in the prior year for restaurants in
operation at least thirteen months.

McDONALD'S CORPORATION OPERATING MARGINS
COMPANY-OPERATED AND FRANCHISED RESTAURANT MARGINS –
McDONALD’S RESTAURANT BUSINESS**
--------------------------------------------------------------
----------
%
Inc/(Dec)
Quarters ended Percent Amount As
Constant
September 30, 2002 2001 2002 2001 Reported
Currency*
--------------------------------------------------------------
----------
Company-operated
U.S. 15.5 15.9 $ 128.5 $ 127.3 1
n/a
Europe 17.1 18.9 182.0 187.7 (3)
(10)
APMEA 12.2 12.2 68.0 62.4 9
5
Latin America 10.1 10.1 17.4 20.7 (16)
(7)
Canada 15.1 16.8 20.7 21.1 (2)
(1)
Total 15.1 15.9 $ 416.6 $ 419.2 (1)
(4)
Franchised
U.S. 79.6 79.9 $ 462.5 $ 469.9 (2)
n/a
Europe 77.6 78.4 244.5 215.6 13
3
APMEA 86.1 88.3 56.7 58.7 (3)
(7)
Latin America 69.3 68.4 20.3 25.1 (19)
(1)
Canada 80.6 81.8 28.9 29.3 (1)
-
Total 79.2 79.7 $ 812.9 $ 798.6 2
(1)
--------------------------------------------------------------
----------
%
Inc/(Dec)
Nine months ended Percent Amount As
Constant
September 30, 2002 2001 2002 2001 Reported
Currency*
--------------------------------------------------------------
----------
Company-operated

U.S. 16.7 16.2 $ 394.9 $ 383.8 3
n/a
Europe 16.0 16.8 468.8 464.5 1
(2)
APMEA 12.3 13.2 196.3 188.3 4
3
Latin America 9.2 11.1 48.4 69.5 (30)
(26)
Canada 14.6 16.2 55.2 58.4 (5)
(4)
Total 14.9 15.4 $1,163.6 $1,164.5 -
(1)
Franchised
U.S. 79.5 79.9 $1,357.6 $1,354.1 -
n/a
Europe 76.9 77.1 653.7 583.6 12
8
APMEA 86.1 85.9 162.9 174.6 (7)
(7)
Latin America 68.1 68.6 64.4 78.3 (18)
(6)
Canada 79.4 80.5 76.8 79.2 (3)
(1)
Total 78.8 79.1 $2,315.4 $2,269.8 2
1
reported
results.
** Operating margin information relates to McDonald’s
restaurant business
and excludes Partner Brands.
n/a Not applicable

McDONALD'S CORPORATION OPERATING MARGINS
COMPANY-OPERATED MARGINS AS A PERCENT OF SALES –
McDONALD’S RESTAURANT BUSINESS*
--------------------------------------------------------------
-----------
Quarters ended Nine
months ended
September 30
September 30
2002 2001 2002
2001
--------------------------------------------------------------
-----------
Food & paper 33.9 34.5 34.2
34.3
Payroll & employee
benefits 26.2 25.4 26.2
26.0
Occupancy & other
operating expenses 24.8 24.2 24.7
24.3
Total expenses 84.9 84.1 85.1
84.6
Company-operated margins 15.1 15.9 14.9
15.4
* Operating margin information relates to McDonald’s
restaurant
business and excludes Partner Brands.

McDONALD'S RESTAURANT INFORMATION
SYSTEMWIDE RESTAURANTS
--------------------------------------------------------------
---------
At September 30, 2002 2001
Inc/(Dec)
--------------------------------------------------------------
---------
U.S.* 13,337 12,953
384
Europe
United Kingdom 1,208 1,150
58
Germany* 1,181 1,114
67
France 945 884
61
Spain 328 294
34
Italy 326 303
23
Sweden 243 234
9
Netherlands 212 207
5
Poland 193 185
8
Austria 156 155
1
Other 1,169 1,096
73
Total Europe 5,961 5,622
339
APMEA
Japan* 3,876 3,718
158
Australia 720 711
9
China 523 392
131
South Korea 360 289
71
Taiwan 359 341
18
Philippines 237 231
6
Hong Kong 212 185
27
Other 1,240 1,188
52
Total APMEA 7,527 7,055
472

Latin America
Brazil 577 556
21
Mexico 250 218
32
Argentina 204 214
(10)
Other 586 558
28
Total Latin America 1,617 1,546
71
Canada* 1,264 1,181
83
Partner Brands
Boston Market 657 674
(17)
Chipotle 212 152
60
Donatos 208 191
17
Aroma Café - 43
(43)
Total Partner Brands 1,077 1,060
17
Systemwide restaurants 30,783 29,417
1,366
Countries 121 121
-
* Includes satellites at September 30, 2002: U.S. 1,096; Japan 1,887;
Canada 315; Germany 49. At September 30, 2001: U.S. 989; Japan 1,737;
Canada 286; Germany 26.

McDONALD'S RESTAURANT INFORMATION
RESTAURANT ADDITIONS
--------------------------------------------------------------
---------
Quarters ended Nine
months ended
September 30
September 30
2002 2001 2002
2001
--------------------------------------------------------------
---------
U.S. 114 74 238
149
Europe 66 27 167
162
APMEA 72 68 206
284
Latin America 19 (28) 36
36
Canada 19 13 41
27
Partner Brands 29 13 2
52
Systemwide additions 319 167 690
710
SYSTEMWIDE RESTAURANTS
--------------------------------------------------------------
---------
At September 30, 2002 2001
Inc/(Dec)
--------------------------------------------------------------
---------
U.S.
Operated by franchisees 10,648 10,342
306
Operated by the Company 1,986 1,902
84
Operated by affiliates 703 709
(6)
13,337 12,953
384
Europe
192
- 45 -

93
54
5,961 5,622
339
APMEA
192
309
Operated by affiliates 3,189 3,218
(29)
7,527 7,055
472
Latin America
Operated by franchisees 709 726
(17)
Operated by the Company 866 779
87
1
1,617 1,546
71
Canada
25
Operated by the Company 434 358
76
(18)
1,264 1,181
83
Partner Brands
1 Operated by the Company 1,025 1,009
16
1,077 1,060
17
Systemwide
699
665
Operated by affiliates 4,267 4,265
2
30,783 29,417
1,366
- 46 -

McDONALD’S CORPORATION
RECONCILIATION OF REPORTED OPERATING INCOME TO
ADJUSTED
CONSTANT CURRENCY OPERATING INCOME EXCLUDING
SPECIAL ITEMS
Dollars in millions
-----------------------------------------------------------
---------------
Quarters ended Nine
months ended
September 30
September 30
% Inc/
% Inc/
2002 2001 (Dec) 2002
2001 (Dec)
-----------------------------------------------------------
---------------
Consolidated
As reported $829.8 $746.6 11 $2,316.3
$2,214.3 5
Charges for
underperforming
restaurant closings 84.1
84.1
Non-cash asset
impairment charges 43.0
24.0
Technology write-off
and other charges 17.4
17.4
Currency effect (35.6) (43.0)
Adjusted constant
currency $794.2 $848.1 (6) $2,316.3
$2,339.8 (1)
Europe
As reported $336.3 $288.0 17 $ 877.7 $
775.0 13
Charges for
underperforming
36.2
Adjusted constant
- 47 -

currency $307.3 $324.2 (5) $ 845.2 $
811.2 4
APMEA
As reported $ 84.2 $ 75.8 11 $ 229.6 $
261.1 (12)
Charges for
underperforming
8.3
Non-cash asset
24.0
3.1
Adjusted constant
currency $ 80.5 $ 87.2 (8) $ 242.7 $
296.5 (18)
(continued)
- 48 -

McDONALD’S CORPORATION
RECONCILIATION OF REPORTED OPERATING INCOME TO
ADJUSTED
CONSTANT CURRENCY OPERATING INCOME EXCLUDING
SPECIAL ITEMS
Dollars in millions
-----------------------------------------------------------
---------------
Quarters ended Nine
months ended
September 30
September 30
% Inc/
% Inc/
2002 2001 (Dec) 2002
2001 (Dec)
-----------------------------------------------------------
---------------
Latin America
As reported $ 6.7 $(22.3) n/m $ (2.7)
$ 14.2 n/m
Charges for
underperforming
35.4
Non-cash asset
Adjusted constant
currency $ 3.3 $ 13.1 (75) $ 14.9
$ 49.6 (70)
Canada
As reported $ 39.3 $ 34.7 13 $ 104.8
$ 98.6 6
Charges for
underperforming
4.2
Currency effect 0.5 1.8
Adjusted constant
currency $ 39.8 $ 38.9 2 $ 106.6
$ 102.8 4
Corporate
- 49 -

As reported $(106.5) $(98.5) (8) $ (264.4)
$(267.2) 1
14.3
Adjusted constant
currency $(106.5) $(84.2) (26) $ (264.4)
$(252.9) (5)
# # #
- 50 -

SYSTEMS AND METHODS OF
INVENTORY MANAGEMENT
- 51 -

Inventory: Inventory is assets that are intended for sale, are in process of being
produced for sale, or are to be used in producing goods.
The following equation expresses how a company's inventory is determined:
Beginning Inventory + Net Purchases - Cost of Goods Sold = Ending
Inventory
In other words, you take what you have in the beginning, add what you've
purchased, subtract what you've sold, and the result is what you have remaining.
Perpetual Systems - Under the perpetual inventory system, the business
maintains a running record of inventory on hand, usually on computer. This
system achieves control over goods such as automobiles, jewelry, and furniture.
The loss of one item would be significant and this justifies the cost of a perpetual
system. Because computers are costing less and less, many small businesses
now use perpetual inventory systems.
Purchases at cost are recorded directly to an inventory asset account. Items
expended are deducted from the inventory account and charged to a cost of
goods sold account. The value of the inventory asset account should be the
same as the value of the cost of the inventory on hand. As a control feature, spot
counts should be made throughout the year and reconciled with the perpetual
inventory records to help ensure the accuracy of the records. Cycle counts of all
items should be made during the year to verify the validity of the perpetual
records and to adjust for breakage, theft, obsolete items, etc.
- 52 -

Perpetual inventory records can be a computer printout like the Deckers' record
shown for a line of Teva sandals in Exhibit 9-2. The quantities of goods on hand
are updated daily, as inventory transactions occur. Many companies keep their
perpetual records in terms of quantities only, as shown in the exhibit. When a
customer orders 10 pairs of sandals, Deckers can refer to its perpetual inventory
record.
Item: Teva Sandals
Date
Quantity
Received
Quantity
Sold
Quantity on
Hand
Nov. 1
5
7
12
26
30
25
25
6
13
21
10
4
29
16
41
20
Totals 50 40 20
Exhibit 9-2
Perpetual Inventory Record—Quantities Only, Deckers
Outdoor Corporation
In the perpetual system, the business records purchases of inventory by debiting
the Inventory account. When the business makes a sale, two entries are needed:
one to record the sale and the other to record the decrease in inventory on hand.
Features of the Perpetual Inventory System
• Continuous records are kept of the quantity
and, usually, the cost of individual items as
they are bought and sold.
• More effective for providing information
about quantities and ensuring optimal
customer service.
• A continuous record is kept of the changes in inventory.
• The cost of ending inventory is determined by subtracting the cost of
goods sold from the cost of goods available for sale.
- 53 -

• A physical inventory count is used only to verify the inventory records.
• The perpetual system is best for firms with high-cost items
Control of Merchandising Operations
• Principal transactions of merchandising
businesses are vulnerable to theft and
embezzlement.
o Cash and inventory are easy to steal.
o These asset accounts are usually involved in a large number of
transactions.
- 54 -

• Management’s responsibility is to establish an
environment, accounting systems, and control
procedures that will protect the company’s
assets.
• These systems and procedures are called the
internal control structure.
Perpetual Inventory System
• Records are kept of the quantity and, usually,
the cost of individual items as they are bought
or sold.
• This system provides useful information for
management purposes.
• The cost of each item is recorded in the
Merchandise Inventory account when
purchased.
• As merchandise is sold, its cost is transferred
from Merchandise Inventory account to the
Cost of Goods Sold account.
Perpetual Inventory System (Continued)
• The balance of the Merchandise Inventory
account equals the cost of goods on hand.
• The balance of the Cost of Goods Sold
account equals the cost of the merchandise
sold to customers.
• The Purchases account is not used.
- 55 -

• Due to the widespread use of computers, the
distinction between which inventory system is
most appropriate is blurred.
Taking a Physical Inventory
• A physical inventory means actually counting
all merchandise on hand.
• It is easy to omit or double count items.
• It is done under both periodic and perpetual
inventory systems.
• Merchandise inventory includes all goods
intended for sale, regardless of where they are
physically located.
Taking a Physical Inventory
• The count does not include merchandise sold
but not delivered or goods that cannot be sold.
• The actual count is usually taken after close of
business on the last day of the fiscal year.
• Counting procedures must be carefully
planned and may include the use of bar
coding.
Inventory Losses
• Most companies experience losses from
spoilage, shoplifting, and theft by employees.
• The periodic inventory system does not
provide a means for identifying these losses.
• Theft losses become a part of cost of goods
sold for the period.
- 56 -

• Perpetual inventory system makes it easier to
identify such losses.
Periodic Systems – The periodic inventory system is used by businesses that sell
relatively inexpensive goods. Many small businesses use the periodic system.
Stores without optical-scanning cash registers do not keep a running record of
every loaf of bread and every six-pack of drinks they sell. Instead, these stores
count their inventory periodically—at least once a year—to determine the
quantities on hand and prepare the financial statements.
Purchases at cost are recorded directly to the cost of goods sold account. The
beginning of the year inventory balance remains in the asset account until a
physical inventory count is taken. The asset account is adjusted to the physical
inventory count balance at the end of the year.
Periodic Inventory System
• Count inventory periodically, usually at end
of accounting period.
• Do not maintain detailed records.
• Figure for inventory on hand is accurate only
on the balance sheet date.
o As soon as any sales or purchases are made, the figure becomes a
historical amount until the end of the next accounting period.
• May be used in business to reduce clerical
cost.
• An important component of Cost of Goods
Sold is net cost of purchases.
• Ending inventory is determined by taking a physical count at the
end of the period.
• Cost of goods sold is computed by deducting the cost of ending
inventory from the cost of goods available for sale.
• The periodic system is best for firms with a large volume of low cost
items.
- 57 -

Under both systems, the business still counts its inventory annually. The physical
count establishes the amount of ending inventory and serves as a check on the
records
Comparison between the periodic and perpetual systems:
How Do We Value Inventory?
FIFO
A popular method in the retail business is FIFO of first in first out. This method
assumes that the first bears you receive are the first bears you sell. Since that is
not always true, this method gives an estimate of the cost of goods sold and of
the ending inventory
Schedule of Sales and Purchases
Purchases
January 13 2001 400 bears @ $25
January 31 2001 700 bears @ $26
March 9 2001 800 bears @ $28
Sales
- 58 -
Periodic Inventory System
• Does not keep a running record
of inventory
• Used for inexpensive goods
• Inventory counted at least once
a year
Perpetual Inventory System
• Keeps a running record of all
goods
• Used for all types of goods
• Inventory counted at least once
a year

February 14 2001 500 bears @$50*
March 16 2001 200 bears @ $56**
Computations
FIFO's computations are harder to follow than Specific Identification's
computations. The computation for sales with the FIFO assumption is the same
as the computation for sales with the Specific Identification assumption. To
compute the cost of goods sold you ignore your sales records. You do not match
the cost of a teddy bear directly against the revenue of the teddy bear. You
assume, on the 14th, you sold all the bears that you bought on the 13th plus 100
bears that you bought on the 31st. You assume, on the 16th, you sold 200 bear
from the purchase on the 31st. You multiply 400 by 25, 100 by 26, and 200 by
26. Then add the products. Since you assumed that you sold all the bears from
the first purchase and 300 bears from the second purchase, you ending inventory
is made up of 400 bears from the second purchase and 800 bears from the third
purchase. To get ending inventory, you multiply 400 by 26, and 800 by 28, and
then add the products. FIFO will give you a high ending inventory, and a low cost
of goods sold. This has several advantages and disadvantages.
Example of Computations
Sales (500*50)+(200*56) =
$36,200.00
Cost of Goods Sold (400*25)+(300*26) =
$17,800.00
Gross Profit $36,200.00 - $17,800.00 =
$18,400.00
Ending Inventory (400*26)+(800*28) =
$32,800.00
Cost of Good Available for Sale (400*25)+(700*26)+(800*28) =
$50,600.00
Advantages
This method favors the balance sheet. In an inflationary market it shows ending
inventory at a more realistic and higher cost. The first bears bought, which were
the least expensive, were the first bears sold. This leaves the last bears bought,
- 59 -

which were more expensive, in ending inventory. Having a higher ending
inventory makes your current ratio larger and your working capital greater. This
will benefit you if you want to get a loan from the bank. A high ending inventory
also makes your retained earnings larger. This will induce people to buy your
stock when you put it out on the market. Another thing that will induce people to
buy your stock is the high net income. You will show this on the income
statement because your cost of goods sold will be so low. This method also
matches the physical flow of the bears. The first bears you get in are the first
bears you displayed in your store, and they were the first ones sold. This would
be a good method to start with. It gives you a high net income and retained
earnings, and this will help Bradford Bear Inc. to grow.
Disadvantages
There are several disadvantages to using the FIFO method. This method uses
bad matching. It does not match the cost to the revenue in the period that it
happened. Since it favors the balance sheet, the income statement is not as
accurate. The cost of goods sold is extra low, which makes net income extra
high. Although a high net income is sometimes an advantage, it can be a
disadvantage also. A high net income will make you pay more taxes, which will
restrict your cash flow. You will have that much less cash to buy teddy bears.
Since the ending inventory is so high, this method will cause you to write down
your inventory to lower of cost or market more often than with other cost flow
assumptions. If your inventory ever falls below the market cost you are required
to write down that inventory. You will have to take a loss in that period.
LIFO
Another method, which is the complete opposite of FIFO, is LIFO or last in first
out. Under this assumption the last bears purchased are the first bears sold. This
puts the last cost in cost of goods sold, and the first cost in ending inventory
Schedule of Sales and Purchases
Purchases
January 13 2001 400 bears @ $25
January 31 2001 700 bears @ $26
March 9 2001 800 bears @ $28
Sales
February 14 2001 500 bears @$50*
March 16 2001 200 bears @ $56**
- 60 -

Computations
To compute ending inventory and cost of goods sold for LIFO, you assume the
most recent purchases were sold first. You sales computation is still the same as
in the first two assumptions but the ending inventory and cost of goods sold,
computations will be different. To compute the cost of goods sold you assume
that the sale on the 14th included 500 bears from the purchase on the 31st. You
assume that the sale on the 16th included 200 bears from the purchase on the
9th. So you multiply 500 by 25, and 200 by 28, and then add their products. To
compute the ending inventory you assume that your entire beginning inventory
was not sold, 200 bears from the purchase on the 31st were not sold, and 500
bears from the purchase on the 9th were not sold. You multiply 400 by 25, 200
by 26, and 500 by 28. Then add their products. LIFO gives you a high cost of
goods sold, which makes your gross profit low. LIFO also states ending inventory
at a low cost. This has several advantages and disadvantages.
Example of Computations
Sales (500*50)+(200*56) =
$36,200.00
Cost of Goods Sold (500*26)+(200*28) =
$18,600.00
Gross Profit $36,200.00 - $18,600.00 =
$17,600.00
Ending Inventory (400*25)+(200*26)+(600*28) =
$32,000.00
Cost of Good Available for Sale (400*25)+(700*26)+(800*28) =
$50,600.00
Advantages
An advantage of the LIFO method is the income statement is accurate because
the more realistic and most recent cost is in cost of goods sold. In an inflationary
market, this makes cost of goods sold high and makes gross profit low. This is a
big advantage when it comes to tax time. You will pay less income tax if you use
- 61 -

LIFO. This will increase your cash flow; you will be saving money that you would
have to pay if you were using another cost flow assumption. LIFO keeps you
from writing down you inventory frequently because this assumption show ending
inventory at a low cost. The last purchases are in cost of goods sold and the first
purchases are in Ending Inventory.
Disadvantages
Although having a low net income is great during tax season, it is not so great for
the rest of the year. Banks and stockholders will be looking at the net income
when they decide on investing. Having a low net income could dissuade some
investors. This will not allow you to grow as quickly as FIFO would. Another thing
that investors look at is the current ratio and working capital. The current ratio
and working capital is lower with LIFO than with FIFO. A big disadvantage of
LIFO is the high profits during an involuntary liquidation. If you were forced to go
out of business and to sell all of your assets, your profits would be very high
because your inventory is so low. You would match the revenue from the sale
against the very low inventory. This will give a large liquidation profit, which will
cause you to pay more taxes. At that stage in your business you will not be able
to afford it. Fortunately, you business is just starting and you should not have to
worry about the results of an involuntary liquidation.
Comparison Information
There are several key ideas to remember about each method when you make
your decision.
Specific Identification – This matches actual cost with actual revenue of a teddy
bear. This is the most accurate way to track you inventory. This method will
become very difficult to use as your business grow
FIFO – This assumes that the first goods purchased were the first goods sold. In
an inflationary market it will give you the highest gross profit and the highest
ending inventory. This will result in the highest net income and the highest
retained earning. A high net income will help you business grow and will catch
the interest of investors.
LIFO – This assumes that the most recent purchases were sold first. In an
inflationary market it will give you the lowest gross profit and the lost ending
inventory. This will give you the lowest net income and retained earnings. This
could dissuade investor and prevent you company from growing.
Weighted Average Cost – This method gives you the median between LIFO and
FIFO. It determines the weighted average cost per bear and it applies it to all the
- 62 -

bears. This method could also dissuade some investor because you net income
will not be as high as it could have been.
Average Cost Method
Overall:
We are using VA cost and utilization data to estimate the cost of VA
patient care encounters. Cost data consist of department-level costs
reported in the VA Cost Distribution Report (CDR). Utilization data are
from the VA Patient Treatment File (PTF) and the National Patient Care
Database Outpatient Procedures File. Information from non-VA sources is
used to estimate the relative cost of each VA healthcare encounter; the
relative cost can be adjusted with data from the Cost Distribution Report to
estimate the actual cost of each encounter.
We call this the "average cost" method, as its assumes that every
healthcare encounter has a cost that is the average cost of all encounters
that share its same characteristics. (Although the U.S. Panel of Cost
Effectiveness and Medicine calls this a "gross cost method," we feel our
name is more descriptive).
Since the accuracy of the estimate depends on the level of detail, we are
using the greatest level of detail found in centralized VA datasets for which
we can determine a measure of relative value. The method also assumes
that relative value weights from the non-VA sector accurately represent
VA costs. While these assumptions limit the accuracy of our cost
estimates, they permit us to create a comprehensive set of encounter-
level estimates of all VA patient care cost. This method is useful to find the
cost of care that is not directly affected by the intervention under study
Inventory Valuation:
The cost assigned to inventory for the purpose of establishing its current value.
Inventory valuation is determined according to the basis by which a firm assumes
inventory units are sold. If the first units acquired are assumed to be the first units
sold (first-in, first-out), costs of the last units purchased are used for valuing
inventory remaining in stock. Conversely, if the last units acquired are assumed
to be the first units sold (last-in, first-out), the costs of the first units purchased
are used for valuing the inventory remaining in stock.
- 63 -

Inventory Management at McDonald’s.
We had a detailed meeting session with Mr. Baber Malik, the human resource
manager of McDonald. He gave us all the necessary information regarding the
system of management of inventory at McDonald.
About Inventory components and Suppliers
McDonald is dealing with 52 different food items as components of inventory, a
part form food item there are 204 non-food items like cups, mugs, spoons
napkins and coffee stirrers etc. All these items are treated on the basis of FIFO
(first in first out) as most of the items in the inventory are perishable. Also their
cups and leaflets have the pictures if current offers for a particular time period.
The main items in their inventory are
 Chicken.
 Fish.
 Beef.
 Buns.
 Mayonnaise.
 Tomato Ketchup.
 Soft Drinks.
They get the supply of chicken and beef from South Africa. Fish from
New Zealand. Buns for the burgers from Dawn Pakistan. Ketchup and
mayonnaise from Rafhan. They obtain all the soft drinks from Coca Cola Lahore.
Venus is their central suppliers of each branch in Lahore and is located in
Gulberg.
How the System works
They have implemented a computerized system throughout their branches in
Lahore. All these branched are connected to a centralized database, which is in
- 64 -

their main office, and a reordering system is installed at the office of Venus,
which is capable of getting inputs from every branch. At every branch, software
has been installed which gets input according to the orders placed by a
customer. The order is given as the input and is stored in that system, and
another back copy of the same transaction is generated which is the transferred
to their centralized database, which immediately updates itself, with the record of
the inventory. To further elaborate this process, see the diagram given as
follows, the scenario is, a customer come to any restaurant and orders a Big Mac
meal, this meal contains, two patties of chicken, a bun, some fries, 250ml of soft
drink. It will be wrapped and will be delivered in a tray on which a leaflet will be
kept. Now the transaction will be recorded as
- 65 -
(Gets the incoming order)
The centralized database
Updating: less two chicken patties, 250 ml coke, one
bun, a wrapper, a straw, a glass, no. of fries, a sachet of
ketchup salad, from the total number items in the
inventory, which were previously in record.
System At
branch one
System At
branch two
Input is taken
into the system
System At
branch three
System At
branch
Four
Customer,
ordering a
Big Mac
meal

As all the branches operate centrally, a reordering is delivered to Venus, as soon
as any item in he inventory at any branch office becomes short, as the
transactions go. A request of the reorder is automatically generated at the
system installed at the office of Venus. The manager there receives the orders
and supplies it to that particular branch.
- 66 -

How do they fulfill the reorder request?
Soon the request at their system is generated; the reorder is calculated in the
following manner the system automatically calculates the average of the past five
weeks reorders but drops the highest figure and the lowest figure if the reorders
and calculates the average of the rest and generates a value of the reorder. At
times this value may not be adopted because if some occasions like, Eid, on this
day the reorder will be much higher then the value generated by the system, as
there is a big number of people rushing towards McDonald’s. On the contrary
during Ramzan this reorder will be less then the value given by the reordering
system as the people rarely go out to dine during first 20 days. But in normal
routine mostly the actual reordering value is followed. The order is delivered by
the manger and is received and signed by the authorized manger at that branch,
where the order is delivered.
Reports.
Repots are generated at all the branches to view the daily sales and business
activities for the manger at that particular branch. And all the reports and data is
the transferred via e-mail to their head office at 3 am night. But the head office
can ask for any sort of reports any time, the systems are capable of generating
these all sort of repots. Some of the data is transferred via telephone.
Exceptional transactions.
Some of the exceptional items transactions are also recorded in the system at
the end of the day. The manger that works in the night shift before closing, enters
these updates into the system these items are.
 Employee meals
These transaction are taken to record for the meals that are eaten by the
employees working there, they are given an employee meal token which the
mangers drop into a box they are allowed to have a single meal at a time, if
they eat in addition they write in it on a slip and drop into the same box.
In addition
 The wasted food items
Like those burgers, whose shelf life exceeds 10 minutes, after cooking.
Also those food items, which are mis-handled by the crew in the kitchen, all
these items are wasted in a bin the number of such items is counted
reported as exceptions and are then updated in to the database
- 67 -

ADVERTISING Policies
McDonald company spends least on the commercial adds., as per their
statement ”our customers mostly remain busy they don’t have more time to
watch commercial adds. On the TV, also they have a variety of channels to
watch as almost all of them have satellite and cable networks at their homes,
when they watch TV the moment the commercials start they start flipping the
channels of the TV hence they don’t actually watch adds. ”
Then how do they advertise?
They pay an amount of money to Mobilink and they send a message through
SMS (short messaging service) on the mobile phones of all Lahori residents
at lunch time in this way, each and every person having mobile phone sees
this message and if they show that message to the manager of McDonald
restaurant they get a discount of 20% on their meal.
Shares policy
The issuance of common stocks In McDonald’s depends on the market
repute and profit margin of individual countries and branches. The maximum
number of shares is allotted to a country showing the best profit and market
repute. In U.S.A, UK and Canada general public are allowed to buy the share of
McDonald’s and its relative price is about 25$-30$ , but in Pakistan shares of
McDonald’s are not issued to general public. Every employee at McDonald’s is a
shareholder of the company. The managers and other employees are given
further shares according to their repute and progress by the President here.
Conclusion
After going through the entire process of this project we finally conclude
that there is a difference between what we study theoretically and what happens
in the market on practical level. In McDonald we see that they have implemented
a perpetual system. They all treat their all food items as FIFO; also we went
through different processes during this project, like taking appointment with them,
holding meetings among the group members, and communicating with each
other. All these processes have added a lot to our knowledge and practical
experience.
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226040317 mcdonald-pakistan

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