McDonald's Corporation (NYSE:MCD) is synonymous with successful restaurants and even developed the business model that just about every other restaurant company uses: the franchise. McDonald's is now one of the largest restaurants companies in the world with over 36,000 locations across the globe.
The franchise business model that McDonald's employs is very straightforward. McDonald's owns the restaurant, charges the franchisee rent and gets a percentage of revenues from each franchised restaurant. That's how over 80% of McDonald's locations worldwide are run.
McDonald's is currently in the midst of a turnaround plan to get the company back a growth track. The business has struggled in recent years as consumers have desired healthier options forcing McDonald's to shift direction to get customers back to their restaurants.
However, just because McDonald's has been a wonderful investment in the past doesn't necessarily mean that it will do well in the future. The problem is that investing is all about the relation between the share price and the value of the underlying business. A great company can be a bad investment if the valuation is out of whack. Let's examine what kind of return potential McDonald's has at the current price of $114.09.