Brexit' Seen Affecting Global Restaurant Brands -- Update

By Julie Jargon 

Multinational restaurant companies are likely to feel the impact of Britain's exit from the European Union on their bottom line.

McDonald's Corp. has the greatest exposure to the U.K. and Europe of any U.S.-based restaurant company, with approximately 35% of its operating profit generated in Europe, compared with 4% for Starbucks Corp. and 6% for Yum Brands Inc., the parent company of KFC, Pizza Hut and Taco Bell. Approximately 37% of McDonald's revenue comes from Europe and 9% comes from the U.K.

Since the euro, British pound, Australian dollar and Canadian dollar account for about 70% of McDonald's operating income outside the U.S, a 10% move in the same direction in all four of those currencies would impact McDonald's annual earnings by as much as 25 cents a share, or roughly 5% of its 2015 earnings, Bernstein analyst Sara Senatore estimates.

"While currency translation is likely going to be a headwind to earnings, we also wonder how much overall economic uncertainty might weigh on the consumer mind-set in the near term," RBC Capital Markets analyst David Palmer said in a research note.

McDonald's and Yum Brands didn't immediately respond to requests for comment. Starbucks said it "remains fully committed to the U.K." and that it is "continuing to pursue significant growth plans for the U.K." The coffee giant's Europe, Middle East and Africa headquarters is in London, and it has 850 stores in the U.K., its largest market in Europe.

Write to Julie Jargon at [e-mail]

(END) Dow Jones Newswires

June 24, 2016 12:33 ET (16:33 GMT)

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