Mcdonald pakistan

ASIA PACIFIC INSTITUTE OF INFORMATION TECHNOLOGY

FINANCIAL MANAGEMENT

INVENTORY MANAGEMENT SYSTEM OFMcDonald’s

PREPARED BY:Mustafa Sajid

M. AfzalMehrunnisa AhmedAnsar 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 Suppliers Working of the System Re-ordering Advertising Policies Shares Policy

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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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McDonalds

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http://www.mcdonalds.com/corporate/info/history/img/tm09_lg.jpg

http://www.mcdonalds.com/corporate/info/history/img/tm08_lg.jpg

http://www.mcdonalds.com/corporate/info/history/img/new_ron_lg.jpg

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 EmployerBe the best employer for our people in each community around the world.

2. Deliver Operational ExcellenceDeliver operational excellence to our customers in each of our restaurants.

3. Achieve Enduring Profitable GrowthAchieve 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 oldDick 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!

Ray Kroc At Work- 8 -

"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 HouseIn 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.

The Happy Meal- 9 -

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 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.

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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, LahoreTel: 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 STADIUMThis 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 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.

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Fortress Stadium Cantt., LahoreTel: 6676674

LAHORE DEFENCE - Y BLOCKMcDonald'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, LahoreTel: 5733826-7

LAHORE DEFENCE - PHASE IThis 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, LahoreTel: 5725561-2

LAHORE MODEL TOWN LINK ROADThe 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, LahoreTel: 5171327-8

LAHORE JAIL ROAD SHADMANMcDonald'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, LahoreTel: 7532056-8

LAHORE ALLAMA IQBAL TOWNMcDonald'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 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

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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, LahoreTel: 7846757, 7840051

LAHORE BANK SQUAREMcDonald'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, LahoreTel: 7211223-5

FAISALABAD SATIANA ROADMcDonald’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, FaisalabadTele: 041-734812&3

FAISALABAD SINDBADWe 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, FaisalabadTele: 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 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

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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, FaisalabadTele # : 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 – ConsolidatedDollars in millions, except per

common share dataPercent

Increase/(Decrease)

Quarters ended September 30 2002 2001As

ReportedConstantCurrency*

Systemwide sales $10,908.1 $10,629.2 3 1Total revenues 4,047.0 3,879.3 4 3

Operating income 829.8 746.6 11 6Net 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 2Total 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 COMMENTARYJack 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.

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“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.

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OPERATING RESULTSThe 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 ResultsWhile 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 dataQuarter ended

September 30, 2002Nine months ended

September 30, 2002

Total revenues $55.5 $(44.6)Operating income 35.6 45.4Net income 17.0 19.3Net 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 ItemsIn 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 IncomePer Common Share –

Diluted, Before Cumulative Effect of Accounting

Change

Quarters ended September 30 2002 2001%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 .05Technology write-off and other charges 12.1 .01Corporate investment write-off 8.1 Total special items (53.0) (.04)

Adjusted $ 486.7 $ 492.5 (1) $0.38 $0.38 -Nine months ended September 30As 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 .05Asset impairment charges 43.0 24.0 .03 .02Technology write-off and other charges 12.1 .01Corporate 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 ShareFor 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.

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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 salesPercent

Dollars in millions Increase/(Decrease)



U.S. $ 5,203.4 $ 5,206.5 - n/aEurope 2,846.7 2,520.2 13 3APMEA 1,829.9 1,828.6 - (2)Latin America 357.7 431.4 (17) 8Canada 400.5 391.5 2 3Partner Brands 269.9 251.0 8 8 Total Systemwide sales $10,908.1 $10,629.2 3 1Nine months ended September 30U.S. $15,249.0 $15,071.6 1 n/aEurope 7,707.5 6,969.6 11 7APMEA 5,085.3 5,344.9 (5) (3)Latin America 1,107.7 1,318.4 (16) 2Canada 1,098.5 1,094.5 - 2Partner Brands 788.5 718.7 10 10 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 revenuesPercent

Dollars in millions Increase/(Decrease)



U.S. $ 1,408.1 $ 1,390.8 1 n/aEurope 1,380.7 1,267.5 9 -APMEA 623.7 576.7 8 5Latin America 201.2 241.3 (17) 13Canada 172.9 161.3 7 8Partner Brands 260.4 241.7 8 8 Total revenues $ 4,047.0 $ 3,879.3 4 3Nine months ended September 30U.S. $ 4,076.3 $ 4,060.8 - n/aEurope 3,789.1 3,518.1 8 4APMEA 1,788.0 1,631.6 10 9Latin America 619.4 739.1 (16) 6Canada 473.7 458.7 3 5Partner Brands 760.0 690.2 10 10 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 MarginsThe following combined operating margin information represents margins for

McDonald’s restaurant business only and excludes Partner Brands.

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Combined operating margins

Quarters endedSeptember 30

Nine months endedSeptember 30

2002 2001 2002 2001Dollars in millionsCompany-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/revenuesCompany-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 ExpensesSelling, 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 millionsQuarters endedSeptember 30

Nine months endedSeptember 30

2002 2001 2002 2001Gains on sales of restaurant businesses $ 38.1 $ 21.0 $ 78.5 $ 67.3Equity in earnings of unconsolidated affiliates 14.1 13.6 29.5 50.6Team 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

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and higher losses on property dispositions, partly offset by a benefit from the elimination of goodwill amortization.

Operating IncomeConsolidated 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.

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Operating income Percent Increase/(Decrease)


Reported

Adjusted ConstantCurrency(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 2Partner Brands (10.1) (10.4) 3 3Corporate (6) (106.5) (98.5) (8) (26) Total operating income $ 829.8 $ 746.6 11 (6)Nine months ended September 30U.S. $1,400.0 $1,370.4 2 2Europe (2) 877.7 775.0 13 4APMEA (3) 229.6 261.1 (12) (18)Latin America (4) (2.7) 14.2 n/m (70)Canada (5) 104.8 98.6 6 4Partner Brands (28.7) (37.8) 24 24Corporate (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.

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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 TAXESInterest 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 STATEMENTSCertain 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 COMMUNICATIONSIn 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."

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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 $ %--------------------------------------------------------------------RevenuesSales by Company-operated restaurants $3,019.3 $2,876.9 142.4 5Revenues 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 expensesCompany-operated restaurants 2,584.8 2,440.8 144.0 6Franchised restaurants --occupancy costs 214.2 203.4 10.8 5Selling, general & administrative expenses 438.2 415.9 22.3 5Other operating (income) expense, net (20.0) 72.6 (92.6) n/mTotal 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/mNonoperating expense, net 20.7 22.6 (1.9) (8)

Income before provision for income taxes 715.3 750.5 (35.2) (5)

S:\ \HO\Dept\InvestorRelations\investor\3Q02ER.doc - 31 - 5/2/2023 6:15 PM

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 $ %--------------------------------------------------------------------RevenuesSales by Company-operated restaurants $ 8,566.8 $ 8,229.3 337.5 4Revenues 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 expensesCompany-operated restaurants 7,348.3 7,025.8 322.5 5Franchised restaurants --occupancy costs 622.9 598.2 24.7 4Selling, general & administrative expenses 1,226.0 1,228.3 (2.3) -Other operating (income) expense, net (7.0) 31.9 (38.9) n/mTotal 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/mNonoperating 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 ConstantQuarters 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 3Operated by affiliates 270.9 298.8 (9) 5,203.4 5,206.5 - n/a

EuropeOperated by franchisees 1,623.1 1,412.3 15Operated by the Company 1,065.6 992.4 7Operated by affiliates 158.0 115.5 37 2,846.7 2,520.2 13 3

APMEAOperated by franchisees 555.0 521.3 6Operated by the Company 557.9 510.2 9Operated by affiliates 717.0 797.1 (10) 1,829.9 1,828.6 - (2)

Latin AmericaOperated by franchisees 173.8 218.0 (20)Operated by the Company 171.9 204.6 (16)Operated by affiliates 12.0 8.8 36 357.7 431.4 (17) 8

CanadaOperated by franchisees 247.9 219.2 13Operated by the Company 137.0 125.5 9Operated by affiliates 15.6 46.8 (67) 400.5 391.5 2 3

Partner BrandsOperated by franchisees 10.2 9.7 5Operated by the Company 259.7 241.3 8 269.9 251.0 8 8


SystemwideOperated by franchisees 6,715.3 6,485.3 4Operated by the Company 3,019.3 2,876.9 5Operated 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 ConstantNine months ended September 30, 2002 2001 Reported Currency*------------------------------------------------------------------------U.S.Operated by franchisees $12,072.8 $11,845.5 2Operated by the Company 2,368.5 2,365.6 -Operated by affiliates 807.7 860.5 (6) 15,249.0 15,071.6 1 n/a

EuropeOperated by franchisees 4,362.4 3,879.4 12Operated by the Company 2,939.5 2,761.1 6Operated by affiliates 405.6 329.1 23 7,707.5 6,969.6 11 7

APMEAOperated by franchisees 1,522.7 1,496.0 2Operated by the Company 1,598.8 1,428.3 12Operated by affiliates 1,963.8 2,420.6 (19) 5,085.3 5,344.9 (5) (3)

Latin AmericaOperated by franchisees 554.2 674.8 (18)Operated by the Company 524.7 624.9 (16)Operated by affiliates 28.8 18.7 54 1,107.7 1,318.4 (16) 2

CanadaOperated by franchisees 679.6 680.7 -Operated by the Company 376.9 360.4 5Operated by affiliates 42.0 53.4 (21) 1,098.5 1,094.5 - 2

Partner BrandsOperated by franchisees 30.1 29.7 1Operated by the Company 758.4 689.0 10 788.5 718.7 10 10


SystemwideOperated by franchisees 19,221.8 18,606.1 3Operated by the Company 8,566.8 8,229.3 4Operated by affiliates 3,247.9 3,682.3 (12) $31,036.5 $30,517.7 2 2


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-operatedU.S. 15.5 15.9 $ 128.5 $ 127.3 1 n/aEurope 17.1 18.9 182.0 187.7 (3) (10)APMEA 12.2 12.2 68.0 62.4 9 5Latin 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)

FranchisedU.S. 79.6 79.9 $ 462.5 $ 469.9 (2) n/aEurope 77.6 78.4 244.5 215.6 13 3APMEA 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/aEurope 16.0 16.8 468.8 464.5 1 (2)APMEA 12.3 13.2 196.3 188.3 4 3Latin 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)

FranchisedU.S. 79.5 79.9 $1,357.6 $1,354.1 - n/aEurope 76.9 77.1 653.7 583.6 12 8APMEA 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


** 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 84.6Company-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 306Operated by the Company 1,986 1,902 84Operated by affiliates 703 709 (6) 13,337 12,953 384EuropeOperated by franchisees 3,403 3,211 192

- 45 -

Operated by the Company 2,275 2,182 93Operated by affiliates 283 229 54 5,961 5,622 339APMEAOperated by franchisees 2,122 1,930 192Operated by the Company 2,216 1,907 309Operated by affiliates 3,189 3,218 (29) 7,527 7,055 472Latin AmericaOperated by franchisees 709 726 (17)Operated by the Company 866 779 87Operated by affiliates 42 41 1 1,617 1,546 71CanadaOperated by franchisees 780 755 25Operated by the Company 434 358 76Operated by affiliates 50 68 (18) 1,264 1,181 83Partner BrandsOperated by franchisees 52 51 1 Operated by the Company 1,025 1,009 16 1,077 1,060 17SystemwideOperated by franchisees 17,714 17,015 699Operated by the Company 8,802 8,137 665Operated 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)--------------------------------------------------------------------------ConsolidatedAs reported $829.8 $746.6 11 $2,316.3 $2,214.3 5Charges 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)

EuropeAs reported $336.3 $288.0 17 $ 877.7 $ 775.0 13Charges for underperforming restaurant closings 36.2 36.2 Currency effect (29.0) (32.5) Adjusted constant

- 47 -

currency $307.3 $324.2 (5) $ 845.2 $ 811.2 4

APMEAAs reported $ 84.2 $ 75.8 11 $ 229.6 $ 261.1 (12)Charges for underperforming restaurant closings 8.3 8.3 Non-cash asset impairment charges 15.9 24.0 Technology write-off and other charges 3.1 3.1 Currency effect (3.7) (2.8) 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 AmericaAs reported $ 6.7 $(22.3) n/m $ (2.7) $ 14.2 n/mCharges for underperforming restaurant closings 35.4 35.4 Non-cash asset impairment charges 27.1 Currency effect (3.4) (9.5) Adjusted constant currency $ 3.3 $ 13.1 (75) $ 14.9 $ 49.6 (70)

CanadaAs reported $ 39.3 $ 34.7 13 $ 104.8 $ 98.6 6Charges for underperforming restaurant closings 4.2 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) 1Technology write-off and other charges 14.3 14.3 Adjusted constant currency $(106.5) $(84.2) (26) $ (264.4) $(252.9) (5)

# # #

- 50 -

SYSTEMS AND METHODS OF INVENTORY MANAGEMENT

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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.

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

Quantity on HandDate

Nov. 157

12

25

6

13

10 42916

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http://myphlip.pearsoncmg.com/abdemo/

http://www.investopedia.com/terms/c/cogs.asp

2630

Quantity ReceivedQuantity Sold

25

21

4120

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.

A physical inventory count is used only to verify the inventory records.

The perpetual system is best for firms with high-cost items

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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.

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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.

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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.

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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.

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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

February 14 2001 500 bears @$50* March 16 2001 200 bears @ $56**

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Perpetual Inventory System

Keeps a running record of all goods

Used for all types of goods

Inventory counted at least once a year

Periodic Inventory System

Does not keep a running record of inventory

Used for inexpensive goods

Inventory counted at least once a year

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, 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

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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**

Computations

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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 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

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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 bears. This method could also dissuade some investor because you net income will not be as high as it could have been.

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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.

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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 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

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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

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(Gets the incoming order)

The centralized databaseUpdating: 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 twoInput 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.

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

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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 mealsThese 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

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

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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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