There was an innocuous throw-away line in the middle of the McDonald’s (MCD) conference call on Thursday. It was not about same store comp sales or margins or foreign exchange or menu changes or any other blah blah blah earnings metric. Rather it was a comment about how France is lowering its value added tax (VAT). That’s right, France. You know the country that supposedly hates everything American. Certainly MCD is one of the most American brands know to humankind. The same France that Americans – like our late evening comedians - make fun of because they eat rich foods, smoke too much, bring their dogs to restaurants and don’t share our zest for bravery on the battlefield.
Well, we have plenty to learn from the French. Apparently, in the middle of a global recession and financial crisis that requires bazillions of government dollars from all nations large and small; France is lowering its VAT for restaurant patrons from 19.6% to 5.5%. Of course MCD expects that French tax measure will spur sales and improve margins and profits for the quick service operator.
Unfortunately, our altruistic President Obama has arranged for his Department of Labor to jack up our minimum wage to $7.25 effective today, July 24, 2009. Then he plans on increasing corporate and other taxes to pay for his social programs. The joke is on Obama because that gibberish played out better in campaign sound bites than in reality. This is becoming evident with the backlash, even from his own party, to the health care reform overhaul. You see the French get it – lower taxes, generate consumer spending, increase profits for employers and then more people will get hired. Some might even get paid higher wages without government mandates.
Of course that is not the only lesson we could take from the French. France generates a majority of its electricity from nuclear power. Why can’t we do the same? It appears that we have taken a step backward in that form of energy creation. President Obama put a nail in the coffin of the Yucca Mountain nuclear waste disposal project.
So this country voted for change. We got change for the worse.
Vive la France!
At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC was long shares of MCD --- although positions can change at any time.
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Posted By Scott Rothbort at July 23, 2009