We are LONG MCD even though the company faces several issues from the MACRO environment to an ice-cold relationship between MCD franchisees and management. The latter breaks a rule I have for investing in franchisors, and one of the elements to why we are SHORT QSR.
I remain skeptical about the MCD/BYND agreement, and the recent letter from Marion Gross to the franchise suggests MCD is a long way from even testing the BYND product. The BYND story will now ultimately revolve around how well the McPlant does at MCD, and it is not going to go well for a while. My skepticism is guided by "the franchisee's obsession with continuing with a simplified menu" It will be a long time (2-3 years) before MCD USA goes with McPlant, and they're a better than 50% chance the product never gets out of the test phase.
The same day (2/25/21), BYND put out its press release announcing the 3-year deal with MCD; the head of MCD North American supply chain Marion Gross said, "there are no plans to roll out the McPlant platform nationally in the U.S. at this time." She went on to say, "As we do with all menu priorities, we will work in partnership with the Menu Experience Team on the opportunity, development, and testing to ensure that we determine the best path forward for McDonald's customers and the System.
Since the earnings release, the BYND CFO has resigned, and the company used the news flow from the MCD deal to do a $1.0B convert. The company's cash burn accelerated in 4Q20 and, given the tenuous financials, will burn significant cash in 2021. Liquidity was never a concern for BYND, but what do they need all that money for? The hype from the MCD deal will fade, and the longer MCD goes without testing the McPlant, the worse it gets for the company.
