Showing posts with label MCD Earnings. Show all posts
Showing posts with label MCD Earnings. Show all posts

Wednesday, October 13, 2010

Day 9: The Price is Right

Now I understand not everyone is as familiar with McDonald's Monopoly as the team.  This is understandable as we are semi-professionals.  But because of this, I thought I should shine some light on the finer details and hidden secrets of the game and the inner financial workings so that you can glean from this knowledge the best way to play the game.  McDonald's is in this to make money after all, so they can't just tell you all their secrets up front.

Fig. 1 - MCD Year-to-date performance shows consistent growth as well as earnings beats for the past 3 quarters  (Source: Sogotrade)
And as you can see, MCD does a great job making money.  (Note: McCappo owns MCD in his private portfolio and recommends it as a solid investment, especially if it sinks down closer to the 50 day moving average of about $74/share.)

Now other than buying stock in MCD to try and profit from the wild success of McDonaldopoly, there are other, simpler ways to come out ahead.  If you delve deep into the annals of the McDonald's Monopoly rules, you can find just how much McDonald's plans to give away.  In section 5 A of the "McDonald's Monopoly: Official Rules," you see that the odds of winning a food prize are 1 in 4.35.  Further, you can see that the Average Retail Value (ARV) varies depending on which prize you win.  I've recorded 5 medium fry wins so far this year (ARV of $1.60), but only 2 large beef sandwiches (ARV of $3.73).  The large beef sandwich is clearly the better prize, and therefore less common.  Now while every small victory counts, and any McDonald's Monopoly analyst will tell you, you can't win in October if you don't take the easy W's, it's important not to get cocky because you're reeling in the breakfast sandwiches (ARV of $1.72).  So remember, Potatoes are Good, but Beef is Better.

**Note: at 1 in 4.35, buying only medium waters leads to an average cost of $1.04 per victory.  Even if you only win medium fries a below average 1 in 6, you will come out ahead $0.16.  Further, if you buy a sandwich off the dollar menu, and 4 medium waters, should you win anything other than the fries or breakfast sandwich you still come out ahead.  I cannot stress the importance of buying medium waters enough.

Now if we move on to section 5 B of the Rules, McDonald's is a little more straight forward with the individual odds:

Fig. 2 - Chart of Prizes considered reasonable to win (source McDonald's Monopoly: Official Rules)
Now the food prizes, at overall odds of 1 in 4.35 (and marked by an asterisk on advertisements as "most common") are nice, and they keep you going.  But after counting intangible costs (gas, time, future doctors visits on account of elevated LDL levels, etc), McDonald's may not win, but you won't either.  It's important to come away with something that, while maybe not monumentally valuable, will make you feel as if you won big.  Remember, this game is 90% mental.  As you can see in fig. 2, the odds are listed for non-food prizes.  Now Redbox and Snapfish suck, we all know that.  And frankly, I'd gladly trade either for another medium water.  A bird in the hand may be better than two in the bush, but a Redbox in hand just causes aggravation.  However, when I won that $5 Walmart gift card I was ecstatic.  $5 is not a life changing amount, and at 1 in 566, it was only slightly rarer than a Redbox.  But it was the feeling.  I won big that day.  And maybe some of you at home have a Redbox at your grocery store or use Snapfish a lot, so you can get that feeling on one of those pulls.  Otherwise, what we're really playing for here are the intermediate prizes.  The gift cards or the Pogo Subscription, maybe, just maybe an EA video game.  Because while McDonald's doesn't mind giving them away, and they won't change our lives, these prizes are rare enough, and just valuable enough, to give you that wonderful feeling of a big win.

Fig 3 - Monumental Instant Wins (with a few exceptions) (source: McDonald's Monopoly: Official Rules)
Now fig. 3 are the prizes that, I hate to say it, but you just can't hope to win.  At least not the average player at home.  I wouldn't put it past the team pulling one of these, but it takes training, dedication, and a team effort to win one of these bad boys and you can't just do that every year.  This is something you hope to get just once in your career, and even some of the greats like Johnny "Two-Pulls" McGee, Carl "Not Another Park Place" Wadalskiburger, and even Sam "Make that 20 Medium Waters" Harley never won.  So good luck, I encourage trying, but maybe this is one you should leave up to the (semi-)professionals.

Fig 4. - Do you see the odds on just $50?  Don't even look at the rest of them (source: McDonald's Monopoly: Official Rules)
Fig. 5- Keep Dreaming (source: McDonald's Monopoly: Official Rules)
As you can see in figs. 4 and 5, are the huge, potentially life-changing, prizes.  These are the wins that make you legends.  Even the pros don't hope for these.  Sure we let them sneak into our dreams occasionally, and it might be the reasons we got into the game as kids, but we know as soon as we start shooting for the big money, the small stuff, the medium fries, the Coke rewards points, hell, even the Redbox rentals, gets pushed to the wayside and before you know it, *BAM* McDonald's has snookered you and made a fortune.  Don't be one of the brain-dead masses, thinking, "This is my year to win a million dollars!" because while it's naive rookies like that that keep McDonaldopoly going, if you want to come out ahead, you can't fall in with the herd.

So that's the skinny for you, McDonaldopolonians.  With knowledge comes power, so go out there and peel for the fences but make sure to keep a level head, play smart, and win wherever you can get it.

I'm lovin' it,

McCappo