"lunch money" is next.
? . . welcome to "lunch money." i'm adam johnson.
We have the best business in video anywhere.
Let's take a look at the menu.
Burgers, fries, mcwraps, how could do not be fired up?
We are assembling a new items at the test kitchen at hamburg university.
Betty liu has a front seat with the exclusive interview with ceo don thompson.
Caterpillar with a big earnings mess.
And facebook is the favorite ahead of earnings today.
Let's take it off with mcdonald's. we're going inside the largest restaurant chain today.
Betty liu went to the home of mcdonald's, oak brook, ill., to find out what makes the company work.
We will show you what she found, as well as the exclusive interview with ceo don thompson.
It is a lot easier to hold a big mac than it is to understand all sides of the company.
Here is mcdonald's by the numbers.
Mcdonald's opened up in 1955. first-day sales included $366. it's famous hamburgers sold for 15 cents.
Today, it feeds over 25 people -- million people in the u.s. daily.
It is a global brand in 118 countries.
Every day, customers eat 9 million pounds of french fries, equal to the weight of 900 elephants.
There are 45 items on their menu, but it is the big five that bring home the bacon.
They account for 25% of sales.
More americans visit mcdonald's more than any other chain, including wal-mart, and it has the grocery list to prove it.
43 million pounds of tomatoes.
102 million pounds of lettuce.
Mcdonald buys 231 pounds of cheese a year, a yearly tally that adds up to $9 billion.
That is 3 billion more than the military food budget, and they have a bigger workforce.
Mcdonald's employes more than the army, marines, maybe, and air force combined.
Don thompson is one of the company's great stories.
He came to the company as an electrical engineer but is now in the corner office.
Since he runs the largest restaurant chain in the world, he has a pretty good sense of the economy.
The informal meeting out category is contracting.
It was predicted to contract about 50 basis points, here in the u.s. but keep in mind, we are gaining market share in the u.s., and we feel good about that, but fairly tepid in terms of the overall category.
He has a handle on what is happening overseas as well.
You have macroeconomic factors of unemployment and austerity measures.
I think many governments are trying to work through that.
We are gaining market share in many markets despite contracting ieco aeo and a waning consumer market.
It has been trouble some what has been happening with chicken in china, which was not part of our supply chain, but nonetheless, it impacts consumers.
That was followed up by the avian influenza, a much more asian epidemic, but china will be a positive market for us.
He can also talk about earnings and the flack that they are getting about growth from analysts.
Everyone needs to keep their minds.
We grew revenues, although not everyone is growing revenues.
We grew income.
We group earnings per share.
And we have taken market share.
And we have outperformed the competitive said.
There are a few players that are doing well.
We are positive and gaining market share.
We are doing well in the u.s. relative to our own position in.
To continue to grow, we have to get more customers.
That is why you see acolytes at breakfast, chicken wraps.
You had the chance to make as yesterday.
I tried the one that you made.
He can talk earnings, economy, and growth, but that is not what gets him fired up.
At the annual meeting, question after question, including an 9-year-old girl, asking, why are you marketing fatty foods to children, why are you encouraging the obesity problems in america?
Do you feel you will ever stop answering the question?
At mcdonald's, there are question that we will keep getting answered.
We are a lightning rod because of our size.
In many cases, we get media attention.
We will keep answering the questions.
I will go back to a comment i made.
I would offer to any of our customers and consumers, do your own research.
Do not just listen to what someone says, or even what i say.
Do your research.
I think you will find, this is a broader issue in the world, bigger than mcdonald's. as the world's largest restaurant chain, you do not feel a responsibility to encourage americans to eat healthier and reduce obesity?
There is a responsibility we have as a large business and socially responsible business to be able to help people.
Our customers realize they had opportunities to get whatever they want to get.
Two, we can help the change, and we have done that.
We have added more fruits and vegetables, we have changed our milk, we have tried to make containers more appealing.
If children would drink more milk, that would help from the cows in perspective, when the area of deficiency.
Do i think we can do more?
We will try to do more.
When parents say that your marketing fatty foods to my kids, what do you say to them?
I say to them, when was the last time you saw raonald onald eating and marketing fatty foods to children?
We never see him do that.
He is a clown.
He likes to have fun and he represents our charities.
The average person eats at mcdonald's three to four times a month.
So i am a parent of two children.
I know what my kids eat.
I know what i allowed my kids to eat when they were younger.
I would bring them to mcdonald's then, i would do it now, because the food is high- quality, safe.
They have choices.
If they want fries, i am quick to let them have it, if they are active and moving.
There is nothing wrong with that.
Murders and fries is an american staple.
By the same token, they also eat vegetables.
I would offer to all of us, get to know what we have.
We have some great silence.
They do not represent a lot of our -- salads.
Did not represent a lot of our sales, but we have choices.
We have apples, smoothies.
Move around the menu as you see fit and if there is something that you do not think customers will want, let us know.
We are going to get to that later when we take you to hamburger u. we are inside mcdonald's today.
Plus, we will talk about another big company, caterpillar.
They had a big earnings miss.
This is my kind of show, food and trucks.
This is "lunch money." you can also watch us streaming on your tablet, phone, and on bloomberg.com.
And we are also now on all windows phones.
Lots of earnings out this morning, including boeing.
The company boosted its full- year earnings forecast after the second quarter profits surged on higher aircraft deliveries and lower production costs.
This morning, the former american airlines ceo bob crandall spoke about how many more negative headlines we will have to see before it impacts their finances.
If you look back at the introduction of the 747, they have these problems.
The 787 is moving way beyond existing technology, and that is why it is so much lighter and they're saving fuel.
Caterpillar also on with earnings.
The company cut their earnings forecast.
Mining equipment fell after global sales fell 8% on slower commodity demand from the emerging markets.
Despite the decline, caterpillar is still the largest seller of construction and mining equipment worldwide.
Here is a look of some of their biggest machines.
How cool are those machines?
Ceo of domino's talk about pizza and profit.
And mcdonald's will school you in burgers and fries.
We are talking about the rigorous plans of hamburger university.
We are inside mcdonald's today on "lunch money." ? we are going inside mcdonald's today on "lunch money" and all day on bloomberg television.
It is the largest restaurant in the world, and that means a lot of people to make it run.
1.8 million employees.
Managers and franchise owners have to go through rigorous training, and it all happens at hamburger university.
Betty liu found out what it takes to get that diploma.
It is called fast food, but what mcdonald's serves up is actually a product that has years of research.
On the ground of headquarters just outside chicago, hamburger university is recommended training for all of the company's managers and franchise owners.
The company's founder lead to the creation of the university.
We have got to have some talent.
I'm going to put my money in talent.
Is a unique curriculum that combines home work with hamburgers.
They put their employees through the paces.
Hamburger u is not a cooking school.
On average, each restaurant brings in $2.6 million annually, so its goal is to provide managers with real business smarts.
I have worked in 13 different mcdonalds, six different states.
What is your goal?
To become an owner/operator.
They have all climbed the golden arches, paying their dues in the kitchen before hanging up their apron to become ceo.
The professor here could be training the next ceo.
A lot of times, we get bogged down in the day-to-day details.
It is about thinking big picture and diagnosing the situation to make it better.
That is a skill taught in one of their glasses, which gives students the chance to tackle 36 scenarios in the restaurant.
They run into various scenarios.
A bus coming in, something burning into the kitchen.
You mean that feeling of being in a moment.
Anyone that thinks this is a week off work, think again.
This gets you real college credit, recognized by the american council on education.
Ceo don thompson has been to the university and number of times.
He talked about his career and the criticism over their employment practices.
When i started 23 years ago, i came as an electrical engineer from the defense system.
I had no idea what happened at mcdonald's relative to career opportunity.
Over the last 23 years i have seen some amazing things.
If 40% of executives started out as restaurant employees.
Over 50% of our franchisees' started as hourly employees.
There is no other institution that can boast those kinds of opportunities and success stories across the system.
And so, at mcdonald's, we are really all about, or regardless of where you came in life -- some of these people i mentioned have high-school diplomas only.
Some have their mba's. it is a diverse pool.
But everyone of them has the opportunity to show what they can do in the mcdonald's environment and satisfy customers.
Mcdonald's has always stood for opportunity.
And we are a diverse system.
We represent the demographics of the people walking through our doors.
Our supplier base is one of the most diverse in the world.
We have a lot of checkpoints.
The customers are our checkpoints.
And as you are aware, in the last week or so, the company has been under fire for this financial planning web site that was created a few years ago.
People at mcdonald's, former employees, have said, it shows that mcdonald's is out of touch with the minimum wage workers, that they do not understand what it is like to live on minimum wage.
How do you feel about that?
I will be kind.
I find a lot of those comments interesting.
That tool has been out there for about five years, the website.
It was intended to do something very simple.
That is to help someone who might be entering the workforce for the first time, or someone who has not have -- had financial planning, to manage their finances.
There are thousands of these web sites out there.
Five years ago, to provide something like that internally, i thought, was an innovative idea.
When i was a younger age, i did not know anything about financial planning or management.
It took my wife to help me out on that.
I would have loved to have something guide me through.
That is what that tool was all about.
There was something about two line items for income.
They said $20 for health care is unrealistic.
If you have a spouse or significant other, -- so it was intended to be a two spouse house hold?
Regardless of their demographic or household, it was designed to be a tool.
More of our interview with don thompson, plus, meet the mad scientist in the mcdonald's test kitchen.
And we meet the man who holds the keys to the mcdonald's history books.
It is 26 minutes past the hour, so here is how the markets are trading right now.
Weakness in the s&p 500, down 5.5 points, in line with the percentage drop in the dow jones.
The nasdaq clinging to gains ever so slightly.
Up six points on apple's better than expected earnings.
Eli lilly is up 3% after the company raised its full-year guidance after second quarter sales rose back to the unexpected.
The company reported a dollar in earnings per share.
The company also saw second quarter profits increase . and boeing increasing its full- year forecast by 10 cents.
General dynamics reported second quarter earnings that beat estimates.
Jet sales helped to offset units producing military vehicles.
President obama is expected to make an appearance and speak at knox college.
It is the same place he gave his first economic speech after being elected junior center of illinois.
The president is trying to bring the focus back to the economy, job security, and affordable health care.
It is scheduled for 12:50 p.m. eastern time.
We will bring you there live when it happens.
This is "lunch money." you can also watch us streaming on your tablet, phone, and on bloomberg.com.
Here are some of the moving pictures grabbing headlines.
Take two at the dell shareholder meeting.
It ended like the one last week.
Dell increased michael dell's bid to a $13.75, prompting the delay, but we have learned a special committee evaluating the offer was at least $14 a share.
At that price, they would be open to tweaking the voting rules.
Fabrice tourre testifies for the first time in his trial against the sec.
He is on trial for allegedly misleading investors in structuring and selling real estate-related investments.
That investment lost a billion dollars when the mortgage market crashed.
25 million, that is the minimum bid for the miami mansion formally owned by the late fashion designer gianni versace.
It features a pool with a gold- pleated styles.
It was initially listed at $125 million before the price was dropped to $75 million.
He bought the property in 1992 but was fatally shot on the steps in 1997. a lot happening on the earnings front, especially on the food and beverage sectors.
We want to go from mcdonnell to pepsico.
They did well in the last quarter beating analysts' estimates, but not everyone is as happy.
Someone pepsico to split their food and beverage units in order to increase value.
Here is what the cfo had to say.
We think the portfolio is working right now.
Combine with the relentless focus we have and productivity makes us work.
The risk of man in the billion dollar transaction and then trying to drive synergies out of that, taking on integration, we do not think it makes sense for shareholders.
You are dead on, it is hard to accept large size transactions.
What is the number-one push back you have over the risk of $80 billion transaction?
It really falls into two categories.
One, is the integration risk of putting together those two businesses into operating in almost 200 companies, combined with the fact that for the premium we would have to pay, i do not doubt that shareholders would do well.
I have doubts about shareholders for pepsico.
For those looking at the transaction, what is their percentage ownership of pepsico?
Generally it is the other holders.
Dominoes reported a 90% growth in quarter profit.
They say growth was driven by strong sales and new ventures overseas.
Strong sales in the u.s., new ventures overseas.
But an earnings report is not just about making shareholders happy.
I spoke with the ceo of domino's and he said it was about the customer experience.
We want people to feel good about what they are getting, we see more retention of customers.
We are very happy with the quarter.
Why do you think investors chose to take the stock down 10% on what appeared to be an outstanding earnings report?
We are almost double over the past 12 months.
I will not worry about day in, day out trading.
Overall we have generated terrific returns for shareholders.
If we keep putting a quarters like this, the stock will take care of itself.
Let's talk about some of the new products.
You were here a couple of weeks ago.
You brought some new products, i wish you were here today.
We can have that arranged.
Look at that.
What are some of the new products we can look forward to in the commercial break?
We will not talk about anything we have not announced yet, but there is a lot coming on the technology side and product side.
Innovation for us now is not just about the product of the month club.
It is about coming out with things that will materially improve the customer experience.
That may be product, or things in technology that allow them to access the brand in a different way, the way that consumers want to do that now.
Plenty in the works on that front.
That was at 8:30 this morning, and yes, i have been set in the break.
Coming up, we go into the mcdonald's test kitchen.
? we are going inside mcdonald today on "lunch money" and all day on bloomberg television.
So when do they know they have a good product?
From the journey of an idiot to the customers not, the main stop is the test kitchen.
Betty liu finds out what it takes to make the menu.
That is how long it took to make this, and this, and this.
Currently 145 tauruses, all of which took nine months to four years to go from idea to your plate.
This is the lead food scientist and the brains behind the all encompassing breakfast sandwich.
They wanted the platter idea where you have sausage, eggs, and we finally arrived on the hot cake idea.
Getting an item on the menu is no easy feat.
How do you know when you have a new product, whether you can bring that into the top five?
It is hard to say what will be the next big mac.
It is not until we see how it resonates with consumers overtime at the restaurant.
There are 40 members of the innovation team consisting of chefs, dietitians, and marketing specialists.
People spend all day trying to execute new menu items, like the now famous smoothie.
You get to pick the size, and it will automatically make it for you.
Altogether about 30 seconds from the time you start it to pouring.
Smoothies make up 9% of all menus, but not all items have handouts.
For a while we had pizza, but that did not work.
It would there is something that we sell a lot of, the quality cannot be consistent.
We want to deliver consistency to the customer.
Something they are proud of, adding produce to the menu.
Tell me about apples.
It took a lot of work going into what kinds of apples to use.
But was the most important thing you learned?
How temperature-sensitive these products are.
When you go beyond the target, you have changes in the quality.
Mcdonald's by 60 million pounds of apples a year, which is why it can take years to launch a product.
When the roll out there smoothie, they had to purchase 30% of the black bears apply in the u.s.. we do a lot of things that we never that we could've done before.
I am getting hungry.
From the test kitchen to loyal customers, don thompson told analysts at a sanford bernstein conference about how he lost 20 pounds eating only mcdonald's. during the week, i am here every day.
On the weekends, sometimes if we are out, i like to stop into a restaurant.
Everyone makes their personal choices.
I made a choice because i was traveling a lot, a lot of things going on, i told myself i had to get back into working out.
I fell off the wagon.
I began to work out more.
That has helped me tremendously.
Can you understand how that got blown up?
When they hear that you eat at mcdonald's every day and you lost weight, how is that possible?
Can you understand why people can be startled by that?
Not really in the me tell you why.
Let me substitute mcdonald's. if i say it a eight and a fine dining restaurant every night and managed to lose weight, okay.
If i am out and i have a big stake -- steak or ribs, if i'm having that late at night and then go to bed, i will put on a few pounds.
It is surprising.
Mcdonald's is kind of a beacon.
People say, how could that possibly be?
We posted our nutritional content.
Look at that and compare that to other offerings in the marketplace, whether at fine dining -- in france, you have people cooking with butter all the time.
If i am in france, i will have a great dinner, whether at a mcdonald's or another establishment.
My point is this.
It is calories in, calories out.
I do not just eat food for sustenance.
Customers want great taste.
I have been eating at mcdonald's for a number of years.
I do better when i'm eating at mcdonald's than when i'm off to something different.
That man is a believer.
We will give you his menu . and you think you have friends?
We will show you the most liked celebrities on facebook.
This is "lunch money." you can also watch us streaming on your tablet, phone, and on bloomberg.com.
And now on any windows phone.
Another important quarterly earnings report.
Facebook comes after the bell.
One thing to watch is social network's growth in mobile advertising.
Who better to talk to about this than the ceo of the largest ad agency in the world?
Facebook is a brenda mechanism.
Mobile search is a much more effective advertising sales mechanism.
Facebook is the third largest country on the planet -- company on the planet.
It is extremely powerful.
What else is powerful in the facebook community?
How many likes you get on your page.
That brings us to our top 5. 74 million.
Mcdonald's is no rihanna, but they do have 24 million likes.
Before there were even computers, mcdonald's already had a rich history.
And they have a roomful of artifacts to prove it.
My job is to document the history of our brand and support the business.
One of the cool things about the archives of room, i feel like indiana jones.
However, unlike indy, i know where things are.
We have humidity and temperature controls to make sure that our our fax last longtime.
-- documents last a long time.
This is one of my favorite pieces.
This is our original big mac foil.
This is the number one store log book.
Sales are broken down by day and also by the weather.
In cincinnati, at that time, a heavily populated catholic area.
They could not have me on friday, and they sold only hamburgers and cheeseburgers, so they came out with the filet-o- fish.
Not many people know about the inion nuggets.
-- onion nuggets.
Those are not going so well, but then we tried it with chicken.
That revolutionized things.
Ceo don thompson is passionate about food.
Here are his favorites.
I will have an egg white sandwich, canadian bacon, another day maybe sausage.
Another day, oatmeal.
I have to have a hash brown every now and then.
For lunch, sometimes a southwest salad, sometimes a big mac.
But i cannot give up the fries.
Maybe i will have to run extra on the treadmill.
President obama is scheduled to give a speech on the economy at knox collagen in illinois.
We will take you there live.
? it is just about 56 minutes past the hour, so that means on the markets.
Take a look and what is happening with stocks.
The s&p 500 and dow jones are down 0.3%. the nasdaq clinging onto fractional gains, helped by apple's better than expected earnings.
But focus on some of the other names.
Electronic arts near a five-year high after sales growth of web- delivered video-game titles was smaller than expected.
The company came out with only 40 cents lost a share.
The biggest laggard is broadcom.
They make chips for apple and samsung.
Falling the most since 2010 after reporting earnings, slowing smartphone sales causing them to issue guidance trailing estimates.
They say third quarter sales will be estimated around 2 billion.
Ford also on whether earnings today.
The company beat estimates and raised its full-year profit forecast.
The focus and fusion were some of the best performers for the company.
The one thing that the cfo highlighted was that the company plans to make business outside of north america more significant in the coming years.
Turning to what is happening elsewhere, we are talking about options.
That will be an important one to watch.
We have seen 1002000 total contracts traded versus 38,000 on average over the last 20 days.
The most of option today is the august $85 put option.
Take a look at what is happening.
Julie hyman has more on caterpillar.
This is an interesting story because we have talked about this company all the time and how it is an economic bellwether for activity all over the world.
This time, in asia released it out on the downside.
That is behind the increased options activity in the stock as well.
Shares are going down today.
Caterpillar says the negative activity in the asia-pacific.
We have a slower growth rate in china, but particularly, the downfall is coming from australia.
So many mining companies are based there.
In number one exporter of iron ore, and so if they see slowing demand for mining, that is not good news for caterpillar and its equipment business.
That seemed to be what is happening.