Shown on the next page are comparative income statements for McDonald's for 2007, 2008, and 2009.

1. There are two kinds of McDonald's restaurants-restaurants that McDonald's itself owns and restaurants owned by McDonald's franchisees. For each of the three years, prepare a mini income statement for McDonald's containing the following items:

Sales by company-operated restaurants

Less: Food & paper

Less: Payroll & employee benefits

Less: Occupancy & other operating expenses

= Operating income from company-operated restaurants

2. From the mini income statements prepared in (1), prepare common-size income statements for McDonald's company-operated restaurants for the three years 2007-2009.

3. Comment on the common-size income statements prepared in (2).

4. Where does McDonald's get more of its total operating income-from company owned restaurants or from franchise operations?

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McDonald's Consolidated Statement of Income 12 Months Ended Statement of Income Alternative (USD S) In Millions, except Per Share data Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2007 Revenues $15,458.5 7,286.2 22,744.7 $16,560.9 6,961.5 23,522.4 $16,611.0 6,175.6 22,786.6 Total revenues 5,487.4 4,331.6 3,922.7 1,139.7 2,367.0 1,670.3 Food & paper. . Payroll & employee benefits. Occupancy & other operating expenses 5,178 3,965.6 3,507.6 1,301.7 2,234.2 5,586.1 4,300.1 3,766.7 1,230.3 2,355.5 6.0 (165.2) 17,079.5 6,442.9 .. . . . Selling, general & administrative expenses Impairment and other charges (credits), net. Other operating (income) expense, net Total operating costs and expenses.__._ . .. _.. . .. . Operating income... Interest expense-net of capitalized interest (222.3) 15,903.7 6,841.0 18,907.6 3,879.0 of $11.7, $12.3 and $6.9. Nonoperating (income) expense, net... . Gain on sale of investment... Income from continuing operations before 473.2 (24.3) (94.9) 522.6 (77.6) (160.1) 410.1 (103.2) 0 provision for income taxes. . Provision for income taxes.. Income from continuing operations. Income from discontinued operation:s 6,487.0 1,936.0 4,551.0 6,158.0 1,844.8 4,313.2 3,572.1 1,237.1 2,335.0 . . (net of taxes of $34.5) Net income .. - 0 60.1 4,551.0 $4,313.2 $2,395.1