Well, now I want to turn to McDonald's earnings disappointing. Uh. Is this not only important for things to come at McDonald's, but also for fast food in general and maybe even for the entire economy. Scott Rothbort joins us now. He's president and founder of Lakeview Asset Management. Scott, welcome back to the show. Thanks for having me on again. Well, let first let's talk about the news. What happened to McDonald's.
Why did their earnings disappoint Well, you know, earning the disappointments are based upon expectations, so one can make the argument that perhaps analysts were expecting that the company would do better, especially with same store sales um But I think you have to look at McDonald's in a more holistic one and and not really focusing on the individual
uh data points that they released. McDonald's is a company really kind of onto a sector of its own when you think about it's it's the largest global restaurant chain. But as I tell my students in Seaton Hall, and I asked them, what's McDonald's in the business of doing? They all say selling him org As I said, No, they're in the they're in the retail business. Sorry, they're in the um uh. They in the real estate business rather than the retail food business because they are one
of the largest real estate operators in the countries. A matter of fact, you can go online McDonald's has a whole list of properties that are for sale by McDonald's. And what McDonald's been doing is that they have been in the process over the last few years of refranchising their units Nella's. McDonald's itself no longer wants to be in the operating business. They would rather be a franchise r and least their real estate to the franchise ease,
and this is the way the business is going. You can't really compare McDonald's to an up and coming restaurant chain like Zoe's you know that's one of my favorite ones, or Wings Stop or Elpoyo Loco. They're really in different categories even though they both sell food, you know, those those companies are a little bit more specialized in terms of the meal that they offer UM and they're much
earlier in their in their growth phase. Having said that, Scott Rothbort, does McDonald's trade as a real estate company or as a restaurant business because the stock is up less than three percent so far this year. Compare that to the SMP five hundred a game about six percent, and it's paying just under three percent of the dividend. Well,
it's a great question, UM. I have said for the last several years, UM that you have to look at McDonald's as being a dividends stock, as a company that's basically going to be paying out cash brow through dividends and stock repurchases. Now, Pimnew and I have talked about McDonald's well over a decade now, and I brought it back in two thousand three when the company was really at its body in the midst of really a problematic
period for the company. And then over the next ten years they transformed themselves and and fix the company up. They expanded internationally, and by two thousand and thirteen, you really couldn't do anything more with McDonald's that you had already done over the course of that period of time. And now it was now it's about squeezing as much cash flow out of his operations, out of his franchise,
of his real estate. So I look at McDonald's as a company that's yielding three That yield is going to go up probably sometime in the fourth quarter of this year. UM, and I look at McDonald's in the point of view of being a substitute for UM bonds rather than being
a growth company. Okay, that's interesting point because we see in our bloomberg A news story today that Stiffill financial corpse Paul Restaurant has raised concerns about the restaurants actor hitting a downturn, harbinger for a broader economic slump in the US next year. UM westra and Jefferies Group analyst Alexander Slagel downgraded other restaurant stocks today. Red Robin, So, I guess you're saying you don't compare McDonald's to the
other sort of you know, fast casual dining chains. You say that they exist in their own and they're they're safe like a bond. But when you look broadly at the industry, what's it telling you, well would tell me, is that it's a very broad industry. You really answered your own question there. UM, I look at companies like Zoey's, which is in the early part of his growth process.
By the way, we own Zowey's UH in our restaurant portfolios. UM, we talk about Zoe's and McDonald's another restaurant companies in our newsletter, which is available for the general public. Um. Uh and uh you know McDonald's it really is, is a much older, more established company. Um. But when you look at David Buster, I'm not going to say that the people who go to David Busters are gonna be
the same people who are gonna go to McDonald's. What McDonald's has that everyone else doesn't have is basically McDonald's pretty much had every exit on every major um highway along this country, all right, And that's that's really who the tryn to service these days, people who are along the highways, people who want quick meals. The same cannot be said for I Dine sorry, um for um, for Dine Equity, who owns Applebee's an Eyehop. The same can't be said for you know, all the restaurant chains, um
like Ruby Tuesday. Hey look yesterday. Um, there was a major investor who put a lot of money into Buffalo Wild Wings. So you may have some antalts who come out and down uh down grade the entire industry, but I think selectively, there are some great bargains uh. And there's some great road ahead for some of these chains. Scott Rothfort, the founder, the president of lake View Asset Management, Thank you very much. This is taking Stock. I'm PIM Fox my co host Kathleen Hayes. This is Bloomberg. H