Plans to Buy Israeli Franchise Prompt Slip at McDonald's (NYSE:MCD) - TipRanks.com

There are generally two kinds of McDonald’s (NYSE:MCD) restaurants: corporate, those owned by the corporation, and franchisee, those owned by different businesses that pay licensing fees back to the corporation. McDonald’s just made one particularly substantial shift in that vein, and investors weren’t exactly happy about it, sending shares down modestly in Thursday afternoon’s trading.

McDonald’s announced plans to buy Alonyal, a 30-year-old franchising operation in Israel. That, in turn, brings 225 restaurants into McDonald’s control and saves, at least for now, over 5,000 jobs. The move was made in response to the Israel-Hamas war that hit several Middle East markets particularly hard for McDonald’s restaurants.

When Alonyal started offering discounts to Israeli Defense Force soldiers, that prompted significant new tensions between the chain and other Middle East operations. When Oman McDonald’s outlets raised $100,000 for Gaza relief efforts, tensions only expanded from there. Thus, the buyout move came in that might defuse at least some of this tension.

Meanwhile, In the United States

Back on home turf, things aren’t looking great for McDonald’s either. With franchisees and corporate restaurants alike facing $20-an-hour minimum wages in California, prices are on the rise. While McDonald’s owners almost facetiously confess that a Happy Meal will not cost $20, prices are indeed going up. One restaurant hiked prices between 5% and 7% to try to cover the newly expanded costs.

But it’s not just California, either; over the last 10 years alone, McDonald’s prices have outright doubled. That’s the word from FinanceBuzz, who found some alarming prices mixed in, like the $18 Big Mac meal in Connecticut and the $7.25 Egg McMuffin.

Is McDonald’s a Good Stock to Buy?

Turning to Wall Street, analysts have a Moderate Buy consensus rating on MCD stock based on 16 Buys and nine Holds assigned in the past three months, as indicated by the graphic below. After a 1.39% loss in its share price over the past year, the average MCD price target of $323.61 per share implies 19.19% upside potential.

Disclosure