MCD - Arcos Dorados: Leading McDonald's Franchisee Is Fairly Valued
2024-02-19 20:10:38 ET
Summary
- Arcos Dorados Holdings is the largest franchisee in the McDonald's system, operating and sub-franchising over 2,300 restaurants.
- ARCO has been able to generate superior net profits through its ability to sub-franchise within its geographical regions, allowing it to earn attractive franchise fees.
- Valuing Arcos Dorados using a sum-of-the-parts analysis, the company appears to be fairly valued at $3.9 billion.
Recently, I had success investing in Carrols Restaurant Group, Inc. (NASDAQ: TAST ), a leading franchisee of Burger King and Popeye's restaurants. In my October article , I noted TAST was attractively valued at just $1.4 million per restaurant s. replacement cost of $1.8 million.
Not long after my article, Carrols announced it was being acquired by Restaurant Brands International ( QSR ), the parent company of Burger King. The transaction value was $1 billion in enterprise value, or $1.7 million / restaurant, a fair price in my opinion....
Arcos Dorados: Leading McDonald's Franchisee Is Fairly Valued