Why Arcos Dorados Stock Just Jumped 16%
Shares of McDonald's (NYSE: MCD) South America, Central America, and Caribbean franchisee Arcos Dorados (NYSE: ARCO) leapt 16% higher through 9:45 a.m. ET Tuesday. The catalyst was what seems to be a rather run-of-the-mill announcement: Arcos Dorados has exercised its option to renew its master franchise agreement (MFA) with the restaurant chain.
It's the specifics of the renewal, though, that are driving Arcos Dorados stock higher today.
As Arcos Dorados (literally, "golden arches") explained today, the parties' existing master franchise agreement is being replaced with a new 20-year MFA that goes into effect on Jan. 1, 2025. Under the terms of the new MFA, Arcos Dorados will pay McDonald's a royalty of 6% of gross sales for the first 10 years of the MFA. Afterward, this royalty rate will rise to 6.25% for years 11 through 15, and then rise again to 6.5% for years 16 to 20.
Source Fool.com
