Day 005 - 04 Jul 94 - Page 64


     
     1        budget is something just above 5 per cent of the total
              profit?
     2        A.  In the UK it is just above 5 per cent, yes.  Around
              the world it varies; it depends on the country.
     3
         Q.   I believe the overall figures, it is something like $1.1
     4        billion advertising expenditure in 1989?
              A.  Could be.
     5
         Q.   When the total income was about $20 billion at that time.
     6        So, we are talking about something like 5 per cent.  That
              would be a reasonable estimate, yes, something like that?
     7        A.  I do not know.  In the UK the advertising is about 5
              per cent, just over 5 per cent, of sales.  In our
     8        countries around the world it varies dramatically.  In the
              US it is nowhere near 5.
     9
         MR. JUSTICE BELL:  You mean it is less than five?
    10        A.  Dramatically less, which is the bulk of restaurants.
              I do not know what the average is.  I do not think I have
    11        ever seen it shown as an average for the worldwide system
              per se.
    12
         MR. MORRIS:  So, if we, say, add up profits of 5 per cent with
    13        the advertising revenue of 5 per cent approximately, we
              have a total of 10 per cent.  Does the company prefer to
    14        spend its income on advertising and offer the profits to
              shareholders rather than pay crew higher wages?
    15        A.  We prefer to build a business so we can have employees
              to whom we can pay something.  Advertising has helped us
    16        build this business around the world.  There would have
              been no business without McDonald's being able to
    17        advertise who it was, what it was, what it stood for, to
              the world populous.
    18
         MR. JUSTICE BELL:  You are not suggesting that if they cut
    19        their advertising to two and a half per cent, they could
              pay 2.5 per cent, that 2.5 per cent, to the workforce?
    20
         MR. MORRIS:  I am saying that ten per cent of their income
    21        which presently goes on advertising and profits could go
              feasibly, could they not, to their employees.
    22
         MR. JUSTICE BELL:  If you do not advertise, you do not have a
    23        business, therefore, you do not have any employees.
 
    24   MR. MORRIS:  That is an argument.
              A.  That is my position.
    25
         MR. JUSTICE BELL:  That is what he is saying to you. 
    26        A.  Advertising has built in business. 
  
    27   MR. MORRIS:  It is your choice to do this advertising?
              A.  Well, if I had not done it, we would have no business
    28        to be here discussing.
 
    29   Q.   So what you are saying then ia that people would not go to
              McDonald's unless you advertised?
    30        A.  But I think it is quite possible that far fewer would
              come, in that they would not know who we were, what we

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