McDonald's story part 3

Although McDonalds’s franchises sprouted up across the Midwest and west like wildflowers after a spring rain the company’s success appeared to be short lived. While the original deal he had struck with the McDonald brothers endeared Kroc to early franchisees, it also set his fledgling enterprise on a direct course to insolvency. Thorough 1960, when the chain’s restaurants racked up $75million in sales, McDonald’s earnings were a mere $159,000. “In short Kroc’s concept for building McDonald’s was financially bankrupt”.

Unable to give valued employees like Martino and Sonneborn raises, Kroc paid them by granting them 30 percent of the company. He further diluted his equity by ceding 22 percent of McDonald’s stock to 2 insurance companies to get a 1.5million loan in 1961.

Even this loan, obtained at remarkably onerous terms, only temporarily slaked the firm’s thirst for capital: he needed to raise a huge sum of 2.7million to buy out the McDonald brothers. His relationship with them was a source of irritation as they did not meet his precise standards at the McDonald’s franchises they had sold in California. Kroc realized the value of product identification created by the more than 200 outlets bearing their name. “I needed the name,” kroc lamented. “How far could I go on Kroc burgers?” He mortgaged the company’s future and received the 2.7M.

The recent events

This is an emergency write up for everyone, does anyone of you take notice of the US market, I been on and off it for a while and I long believe it has sink into recession. During the war with Iraq, the amount of money spent on producing weapons and supplying the army already causes the country to run on deficit. Unless they make use of Iraq’s Oil quickly to their benefits, where on earth are they going to come up with 700 billion dollars?

The world is round, so is businesses, it’s all thanks to the generosity of US consumers that we in Singapore can run businesses, manufacture products to be exported to them. They mostly live on credit I presume or else how do they afford luxuries which were not known to 3rd world countries. Guys do let me know whether you agree with me, is it not because they overspend and they run out of a job suddenly, were they unable to pay their mortgages otherwise all will still be peaceful. Continuing to pay on time to the banks which will also continue to pay fat bonuses for their top bankers?

In another light, if the US does not consume these products who on earth are we going to export our products to? I guess it’s a pretty vicious cycle; we need their spending power to propel our economy in a way.

In conclusion, why not just spend wisely for now, if you do have a huge cash reserve it could be around time to spurge on investment products or buying a few properties. When the market gets better again you can make your profits than.