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A woman walks past electric bikes sitting outside a McDonald's fast-food outlet in central Beijing.

DAVID GRAY/David Gray/Reuters

From the FT's Lex blog

Incoming McDonald's chief executive Don Thompson has a supersized problem: the burger chain has few obvious problems.

As he takes over from Jim Skinner, who announced his retirement on Thursday, he knows the shoes will be tough to fill. Since Mr. Skinner became the boss in 2004, McDonald's has returned almost 300 per cent, eight times the return of the S&P 500. Taking the helm after losing two CEOs in seven months, Mr. Skinner inherited a company recovering from falling earnings early last decade.

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So with no crises or significant operational problems to fix, Mr. Thompson, a 22-year veteran of the company, has to find a creative way to maintain McDonald's stellar performance. One way is further international expansion. Despite owning one of world's most recognized and powerful brands, McDonald's still generates more than one-third of its revenues, and almost half its profits, from the United States. Mr. Skinner was reserved about diversification. In the five years before he took over, the company's overseas assets grew at a compound annual rate of almost 7 per cent. During his tenure, this rate almost halved. Accordingly, the CAGR of international revenues, which was previously about 8 per cent, dropped by about one-fifth. At home, however, growth in assets and revenues remained constant.

McDonald's has already said that it is in expansion mode. This year it plans to spend $2.9-billion and open 1,300 new stores. By comparison, it has added only about 3,000 net new sites in the past decade.

Inheriting a well-run and successful company can be as much a curse as it is a blessing. Mr. Thompson is fortunate that there is a clear way for him to expand further. And as McDonald's last year turned 130 per cent of its net profit into operating cash flow, he is lucky that he can afford to do so.

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