McDonald, Fast Food that is Recession-Proof

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May 17 2009
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Not many moons ago I wrote that the no-brainer or average-Joes yardstick to measure if the economy was getting bad was to look at how Starbucks’ (Nasdaq: SBUX, stock) business was doing. Furthermore at about RM10 a cup of coffee it’s considered a luxury, at least to the majority of the men on the street who may make less than RM3,000.00 a month. And that’s not a lot of money considering the forever escalating inflation in a country such as Malaysia. So the next time you wish to know the status of current economy, just go and observe the Starbucks’ sales for some hints. Recently when I sent my car to a Honda service center I asked the person at desks about the business and he mentioned that sales have been affected quite badly, and this is one of the top service centers that had won numerous trophies or awards, mind you.


In time of economic uncertainties you can see how creativities come into play in order to sustain the business. Talk about fast-food (or rather junk food) and the first thing that come into your mind is McDonald (NYSE : MCD, stock), Kentucky Fried Chicken (KFC), Kenny Rogers and so on. There’re good reasons why McDonald could survive the harshest economic situation, the same way Wal Mart would not perish in the field of cheap merchandise. Fast-food player such as McDonald will survive because they offer cheap, well, fast food although you may argue that it’s not that cheap after all in a country such as Malaysia as compared to the U.S. Sure, I still remember those McValue-Meal that costed me only RM4.99 ten years ago.

McDonald McValue

Thanks to the current recession McDonald is bringing the RM5.95 Value-Meal which is applicable on daily basis but from 12:00pm to 3:00pm, although somehow I can swear that there’s something missing inside that McChicken burger. But I suppose I can’t complain much since they provide relative inexpensive food in a clean and nice environment served by friendly staffs. Somehow KFC always comes in second place when talk about such promotions. Nevertheless workers at fast-food chains are paid peanuts but then you may argue that such jobs do not need highly skill-sets so that’s what they deserve. No doubt the margin of profits are not much for that set of value-meals but the company make great money from the volume. And for that reason McDonald Malaysia which has about 185 outlets is one of the cash-cows in Vincent Tan’s empire.

Vincent Tan won the McDonald franchise back in 1981 and has never looked back since. This businessman who was once the King of “bonus and rights issue” and has little problem frying up his stocks has attracted criticisms and even boycott over his businesses especially when it was reported that he paid one of the frogs, Hee Yit Fong, RM25 million to switch side causing the opposition its Perak state. It’s unsure that exact amount of money involved but the fact that Hee Yit Fong was spoted with her new Mercedez Benz (and not the Toyota Camry which costs the state) means money changed hands. But this is not the first time Vincent Tan was accused of “donating” money especially to the government of the day because he’s “closely linked” to Mahathir since 1980s.

Anyway the call to boycott his business will work very little in affecting his businesses simply because people will still need to enjoy the little luxury left of them – McDonald, not to mention the need to punt over his Berjaya Toto’s betting outlets. It’s not that you can avoid McDonald and go to KFC because KFC and other fast-food chains for that matter are somehow related to the current government. It’s the same like what Mahathir screamed the other day to all Malaysians to boycott American products. Anyhow, it’s not healthy to eat those junk-foods at McDonald too often so the choice is yours.

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they’re stock is going to go ridiculously up! recessions are when companies like these make the most money

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