Mary Kay Shaw - Vice President, Investor Relations James A. Skinner - Vice Chairman, Chief Executive Officer Peter J. Bensen - Chief Financial Officer Ralph Alvarez - President, Chief Operating Officer

Matthew Difrisco - Oppenheimer & Co. John Glass - Morgan Stanley Joseph Buckley – Banc of America Securities John Ivankoe - JP Morgan Mitch Speiser - Buckingham Jeff Bernstein – Barclay Lawrence Miller - RBC Capital Markets Steven Kron - Goldman Sachs Jason West - Deutsche Bank Securities David Palmer - UBS Tom Forte - Telsey Advisory Group Keith Siegner - Credit Suisse Paul Westra - Cowen & Company Rachael Rothman - Merrill Lynch Howard Penny - Research Edge

Hello and welcome to McDonald's October 22, 2008 investor conference call. At the request of McDonald's Corporation, this conference is being recorded. (Operator Instructions) I would now like to turn the conference over to Ms. Mary Kay Shaw, Vice President of Investor Relations for McDonald's Corporation.

Thank you. Good morning and thank you for joining us. With me on our call today are Chief Executive Officer, Jim Skinner, Chief Financial Officer, Pete Bensen, and for Q&A will be Chief Operating Officer, Ralph Alvarez, joining us via phone from Malaysia. Today’s conference call is being webcast live and recorded for replay via phone, webcast, and podcast. Before I turn it over to Jim, I want to remind everyone that as always, the forward-looking statements in our earnings release and 8-K filing also apply to our comments. Both documents are available on www.investor.mcdonalds.com, as are reconciliations of any non-GAAP financial measures mentioned on today’s call with their corresponding GAAP measures. And now I’ll go ahead and turn it over to Jim. James A. Skinner: Good morning everyone. Thanks for being on the call. There is no denying that these are interesting times to be doing business. Yet in spite of the economic and financial concerns around the world, McDonald’s business is growing as we continue to be recession resistant. For the third quarter we are reporting very strong results. Global comparable sales up 7.1%, consolidated operating income up 20%, EPS from continuing operations is $1.05, a 27% increase. And a 33% dividend increase for our shareholders. These results show that the fundamentals of our business are strong. And October sales trends indicate our momentum continues. Our plan to win and commitment to financial discipline continue to drive performance around the world. We have strong operating results, predictable and growing free cash flow, and above target returns, with a 20.8% return on average assets for the trailing 12-month period. These three aspects of our business add up to sustained profitable growth for our system and our shareholders. Specific to the shareholder return commitments, I want to point out that to date we have returned nearly $11.0 billion of the $15.0 billion to $17.0 billion target we set out to achieve by the end of 2009. We are optimistic about our ability to continue our business momentum. The simple fact is, consumer trends are still in our favor and our plans around the world are designed to capitalize on these trends. People’s lives are still busy and they are only getting more hectic. Value, which has always been important, is mission-critical today. For these reasons and more, the eating outside the home market is still projected to grow over the next five years. We are well positioned to capture this opportunity. In the United States there’s no doubt that today’s environment is challenging for consumers and restaurants. However, we are operating from a position of strength, mitigating external factors and growing our business through targeted growth platforms. The United States posted a comparable sales increase of 4.7% for the quarter and we continue to gain market share by providing relevant food and beverages, great value at all price points, and unparalled convenience. Customers have responded to menu additions in our focus areas of chicken, breakfast, and beverages, the fastest growing segments of the eating-out market place. The southern-style chicken sandwich and the breakfast version on a biscuit are both resonating with customers. Coffee continues to be a major driver of business and we remain on track with our specialty coffee roll out. Today, about 3,800 restaurants are serving McCafe coffees and we expect to begin introducing the rest of our combined beverage business products, smoothies, frappes, and bottled drinks in mid-2009. Now there have been questions about the general credit situation and its impact on our franchisees’ ability to make the necessary investments to implement the beverage platform. Our franchisees are still able to get the financing they need. Our expansive network of national, regional, and local lenders coupled with McDonald’s financial strength and reputation ensures ongoing access to credit. Although processing may take a little longer and costs may be a bit higher, this is the current reality for all borrowers today. The bottom line is our strategies are not being affected. In the area of value, consumers are responding to value at all price points on our menu, our core menu continues to account for the majority of our sales, while the dollar menu is effective in helping us grow traffic and maintain customer loyalty in these tough economic times. Our owner/operators are committed to the dollar menu and we continue to explore options to keep it relevant for customers and profitable for our system. We are currently conducting, as you know, consumer testing to determine the best product offerings for today’s environment and we expect to have a decision in the near future. Looking ahead, we remain confident that we have the right strategies in place to grow the business for the long term, while managing through the credit environment. Moving to Europe, our business momentum continues with a comparable sales increase of 8.2% for the quarter. Nearly every European market is contributing positively to these results. While an economic slowdown is being seen in several European countries, we have not been experiencing this at McDonald’s as it relates to sales and guest counts. In fact, while there has been a decline in informal eating out visits in the second quarter, the most recent time period for which data is available, visits to McDonald’s increased. And despite the financial events of the last couple of weeks, trends indicate that the visit momentum remains strong in virtually all of our markets. We are confident that Europe will continue to drive growth through the three strategies of enhancing local relevance, upgrading the customer and employee experience, and building brand transparency. Local relevance is brought to light mainly through our menu offerings. For example, the premium hamburger has been very successful in France and Germany and we anticipate the same results in the U.K. where it was just launched this month. In addition, we are addressing the growing demand for chicken by providing new products at various price points. In the premium tier, we have added the Chicken Legend Sandwich in the U.K. and continue to feature new chicken products on the premium platform in the fourth tier Petite du Jour line in France. Europe’s ongoing restaurant reimaging and convenience efforts help upgrade the customer experience. Since 2003 we have reimaged more than 2,000 European restaurants. A large part of our reimaging this year and in 2009 will take place in our major European markets. In 2008 and 2009 the U.K. will remodel an additional 200 restaurants with an emphasis on drive-thru locations. And Germany will have reached a goal of remodeling or touching all of its restaurants, including about 650 McCafes. Increasing extended hours in drive-thru will also contribute to our growth. Currently about 70% of our European restaurants offer some form of extended hours. Comparable sales during these hours are outpacing the rest of the day and we continue to leverage this opportunity. Nearly half of our restaurants in Europe have drive-thrus. But with just 45% of sales in those restaurants coming from the drive-thru, we have huge opportunity to grow this part of our business by maximizing efficiency, capacity, and order accuracy. And while I have focused my comments on our bigger European markets, it is important to note that that we have opportunity to grow in the new restaurant development in some of these key Eastern European countries. In fact, we plan on accelerating our openings in this region over the next two years, specifically in Poland, the Ukraine, and Romania. These are just some of the reasons we are confident in our ability to continue to deliver strong results in Europe. In APMEA (Asia Pacific Middle East and Africa) the momentum remains strong as comparable sales increased 7.8% in the third quarter. Driving this growth today and into the future is a unified focus on four platforms. Food, especially core, menu, and breakfast, value, convenience and the customer experience. Breakfast represents a $450.0 million opportunity across APMEA. China, for example, has increased its breakfast business in the last year by focusing on core menu items like Egg McMuffin and premium coffee. McBreakfast is 7% of total sales versus 20% you see in countries like Hong Kong and Singapore. We still have tremendous opportunity in this market. Japan and Australia are also growing this part with breakfast sandwiches, premium hot and iced coffee drinks and pastry items. Value continues to be another cornerstone of our results in APMEA, as it is in all of our markets. In China, value is executed through a branded affordability menu, smart couponing, and loyalty cards. In Japan our 100 yen menu is driving traffic and trade up. And in Australia we recently rolled out the Value Picks program. We expect the results of all these programs to continue to drive guest counts and growth, especially in this environment. Convenience also continues to drive strong performance in APMEA. 80% of our restaurants in China are operating 24 hours. We also have a growing percentage of leveraging desert kiosks and delivery. In Japan we have 24 hours and almost 1,500 restaurants and we are working on special night-time menus. Beyond that, we are innovating around convenience with mobile ordering, e-couponing, and Pay Pass. We are very optimistic about our future growth in this area of the world, especially considering McDonald’s is just getting started in many of these markets. In closing I want to reiterate that McDonald’s is operating from a position of strength. As we enter the final quarter of the year, I am optimistic about McDonald’s outlook. We are a strong, stable global business and remain well positioned to generate long-term, profitable growth for our system and our shareholders. And now I will turn it over to Pete Bensen, our CFO, for his comments. Peter J. Bensen: Good morning everyone. I am pleased by our strong results and continued momentum in the third quarter. Jim mentioned the strategies driving our sales and guest count growth in each area of the world. At the same time, profitability and returns are benefiting from our unparalled global supply chain, disciplined operations, and strong financial management. Combined operating margins, a key profitability measure, reached 27.5% year-to-date September. This is up 290 basis points over the same period last year, after adjusting for the 2007 Latin America transaction. This significant increase reflects our solid company-operated and franchised margin performance, along with ongoing G&A control. In constant currencies, G&A was flat in the third quarter as lower expenses in Latin America offset costs associated with our brand-building Olympics-related activities. We remain committed to continuing to control G&A, which declined as a percent of revenues for the nine months, as it has for each of the last five years. The strength of our business and the effectiveness of our strategies are reflected in our restaurant margins. Franchise margins as a percent of revenues increased 60 basis points in the third quarter to 82.9%, its highest level since 1994. Consolidated franchise margin dollars increased 11% in constant currencies, driven by positive comparable sales momentum in every area of the world as well as our refranchising efforts. Consolidated company-operated margins rose 40 basis points to 18.7% in the third quarter due primarily to improvement in APMEA as well as Europe. In APMEA strong comparable sales fueled the company-operated margin increase of 120 basis points to 17%, its highest level in eight years. The ongoing strength of our business in Australia and China led this performance, although nearly every market contributed to the increase. Australia’s Crispy Chicken line-up and extended hours helped drive double-digit comp sales growth and margin improvement in the quarter. In China we continue to grow margins despite the inflationary environment. Given our menu variety, supply chain efficiencies, and comparable sales momentum, we are well positioned to navigate in this environment and further grow our business. As such, we plan to open nearly 150 restaurants in China this year, a growth rate of about 17%. In Europe, our ongoing sales momentum helped company-operated margins increase 50 basis points to 20%, its highest level since 1999. While labor and commodity cost head winds continue to pressure margins, the growing significance of two of our most profitable European countries, France and Russia, as well as improvement in many smaller markets, drove Europe’s increase. In the third quarter our beef costs in Europe rose nearly 16% and chicken increased 12% but because about 75% of our food and paper cost is spread among 10 different items, our overall grocery bill increased just 9% for the quarter. We believe looking at our total basket of goods, or our grocery bill, is a more complete way to look at how commodity costs impact our food and paper costs. Our full-year 2008 outlook is for Europe’s overall grocery bill to increase about 8%. This reflects a full-year outlook for beef and chicken cost increases of 12% and 9% respectively, slightly higher than we thought in July. Moving to the U.S., our U.S. business delivered a very solid 18.2% company-operated margin. This is down just 20 basis points from the prior year, primarily due to higher commodity costs. We are very pleased with this result considering the challenging cost environment. It demonstrates both the continuing strength of our strategies and our ability to execute successfully. For the quarter, U.S. beef costs rose 4% and chicken was up 6% contributing to the overall U.S. basket of goods increasing about 7%. This compares quite favorably with the 12% increase in the food component of the PPI for the same period. For the full year, our outlook for the U.S. grocery bill is also to be up 7%. This includes a beef and chicken outlook similar to that expected back in July, beef up about 8% and chicken up about 6%. In this extremely volatile environment we remain diligent about monitoring the commodity markets. We believe there are opportunities here and we are confident we can continue to effectively manage our input costs in this environment by leveraging our scale and utilizing our supply chain infrastructure and effective risk management practices. It’s worth noting that our goal is to maintain competitive and predictable commodity pricing. We manage our grocery bill like a portfolio, where increases in some commodities can be offset by lower prices on others. Our comprehensive approach to restaurant profitability and margin focuses not only on cost but also price and product mix. This approach continues to be successful, as exemplified by our industry-leading company-operated margins around the world. Our global results are a testament to the strength of our business model and its flexibility to deliver in a variety of operating environments. This enables us to maintain our focus on the long term and continue to invest in key growth opportunities. For example, with our U.S. owner/operators we continue to invest in the roll out of our new beverage business and expansion of our drive-thru booths at the same time. This expansion not only fully enables the beverage business, it also benefits all drive-thru transactions through a more efficient lay out. In addition, we continue to reimage restaurants around the world, improving the overall customer experience and building brand perceptions. Our ability to take advantage of key opportunities like these reflect our strong financial foundation. Our cash is held around the world in investments that prioritize capital preservation over yield. We maintain a strong credit rating, the highest in the restaurant industry. Our owner/operators continue to have access to credit through a network of national, regional, and local lenders. We have access to, but are a minor user of, the commercial paper markets. Our $1.3 billion revolving line of credit has sufficient term remaining and is unused and we secured attractive long-term financing in the first quarter to prefund debt that was retired in the third quarter and we have no additional significant maturities until late 2009. Our prudent long-term approach to financial management has given us flexibility and strength in these unprecedented financial markets. We believe it continues to be exactly the right strategy for today and our future and can potentially enable us to seize opportunities when others can’t. One final comment before closing. As a global business, we operate in over 100 countries with different economic cycles and a multitude of currencies. It’s one of our strengths and may in fact be one of the reasons you invested in McDonald’s. It also means we are impacted by changes in currency translation rates. Over the last few months the U.S. dollar has strengthened against many foreign currencies, especially the Euro and British pound. While this means translation will move against us in the fourth quarter the good news is that it seems to be having a positive impact on oil and other commodity prices. We are proud of our results through the first nine months of the year, particularly given the global economic environment. We remain focused on being better not just bigger, while leveraging a business model that operates well in a variety of economic conditions. I am confident that as we continue to focus on what matters most to our customers and maintain discipline in our operations and financial management, we will further strengthen our global business. Now I will turn it over to Mary Kay to begin the Q&A.

(Q&A Instructions) Your first question comes from Matthew Difrisco - Oppenheimer & Co. Matthew Difrisco - Oppenheimer & Co.: You mentioned earlier in the call, you used the term that you’re recession resistant. Historically Europe has been a little bit more of a middle-class consumer and I would assume China and Asia, your experience is similar there. Do you think with the line-up and with the change of philosophy with how you are approaching growth in those markets, are you also recession resistant there or do you expect we will see a little more volatility, potentially, if these markets follow the trend of the U.S. consumer? James A. Skinner: I commented a little bit on that in saying that we are seeing some slowdown in those markets today, relative to the economic issues and the financial crisis in the credit markets and consumer confidence, but we’re not seeing it at McDonald’s. And we have continued to charge forward with our growth in China. For example, we are going to open 150 restaurants in China and next year we’re going to open more and we’re going to continue to open restaurants in Europe. And so we are confident that we will have the same strategic opportunity in those markets and continue to push forward, particularly with value and convenience, that will be able to show that we are as resistant in those markets, relative to recession, as we are in the United States.

Your next question comes from John Glass - Morgan Stanley. John Glass - Morgan Stanley: We have been in this unprecedented period of FX swings and two questions. Beyond the Euro/pound relationship, which you have highlighted and then sensitivity of earnings, is there material risks to other currencies moving against you and maybe could you quantify it. And in talking about that, Latin America particularly seems to be an area of concern recently. Do you get paid in dollars for their royalties or are you paid in local currencies and is that a translation risk and is there any further risk beyond just the translation risk? Particularly related to Latin America? Peter J. Bensen: I will answer the second part first. We get paid in dollars from Latin America. So our DL partner down there has all the currency risk. So another reason to do the transaction the way we did it. The dollar seems to be strengthening against everybody around the world. The Euro and the pound are the two biggest but if I went kind of sequentially, the Australian dollar and Canadian dollar are probably the next two biggest. We don’t like to forecast exactly what currencies are going to do because they change daily. But as a perspective, if we look at last year’s fourth quarter our average Euro rate was $1.45 and our average pound rate was $2.04. To give you a little order of magnitude of where we’re at relative to last year.

Your next question comes from Joseph Buckley – Banc of America Securities. Joseph Buckley – Banc of America Securities: Back to the food comments, I guess the beef costs in the U.S. being up 4% in the third quarter surprises me that it was that modest. But then if you’re keeping the full-year forecast of up 8%, does it imply a huge, like 20%, beef cost inflation in the fourth quarter? Peter J. Bensen: Yes, it does. And that had been our outlook, we knew this was coming kind of September through December but again, to put it into perspective, our basket of goods was up about 7% for the quarter and we expect it to be up 7% for the full year. So the fourth quarter basket will be slightly higher than the third quarter, but not dramatically higher. And so that’s why we are trying to give a little bit broader perspective on how all of the food costs were going to impact us, not just beef and chicken. And that obviously is just looking at the cost side of the equation. I think our results this year have shown we have done a good job in being able to take price. Our price increases in the U.S. are still below the food-away-from-home. We still think there’s price elasticity there and we have product mix shifts and guest count growth that also impact the margins.

Your next question comes from John Ivankoe - JP Morgan. John Ivankoe - JP Morgan: In the U.S. the year-to-date comp has been up I think 3.7 and price, as you stated previously, is running up about 4. And traffic, from what I understand, is at least around half of the comp. So could you comment on negative mix that you have seen in the U.S. in 2008 and I guess more importantly, as you move forward, whether things like beverages, change in the dollar menu, and even lower gas prices at the consumer level may actually create a positive mix environment for you as we move forward.

I wouldn’t call it negative mix. The problem with an average check is you have a lot of different transactions in there. So our breakfast business, as we have said, in the U.S. continues to grow faster than rest of day and breakfast is a lower average check but a higher margin transaction. The same way with drinks. We were strong in our drink promotions through the summer, as we have talked about. Coffee is up more than 30% and a lot of those end up being transactions that are during off-peaks which are also smaller average checks, or they are only individual versus family purchases. So those things are in the equation you have there and there has been some trade-down, as you would expect during these times, and that’s why we have good value across the whole menu and have actually been strong in pushing our items like Snack Wraps, in order to have an option for our customers.

Your next question comes from Mitch Speiser – Buckingham. Mitch Speiser - Buckingham: I would just like to understand the margins in the third quarter in Europe and Asia Pac. The comps were generally the same in Europe and Asia Pac in the second quarter versus the third quarter and yet the margin improvement was pretty substantial. I know you mentioned some mix shifts in Europe. Was there incremental pricing in the quarter as well? And do you think these levels of expansion are sustainable over the next few quarters? Peter J. Bensen: Europe I will talk about first. That mix shift really did have an impact on the margins. Last September France and Russia, which both have margins over 20%, they were about 17% of the McCopco margin dollars. And now as a result of their growth, as well as the refranchising in the U.K. and Germany, they are now over 20% of the McCopco margin dollars. So we have a higher quality of the remaining McCopcos that are driving that margin percentage for the segment. Pricing was pretty normal and consistent. It was 3% to 4% amongst the major countries in Europe with Russia being higher because of the higher inflation there. As I mentioned in the outlook regarding next quarter, we see, in Europe, a similar cost environment, our basket of good expectations are pretty similar for the fourth quarter as they were for the third quarter. And regarding APMEA, continued strength in Australia and China really led the way, but almost every market had McCopco margin increases. Again, doing a good job of using their strategic pricing to manage the price increases as commodity costs were continuing to come in. So I think they will continue to manage that way going forward as well.

Your next question comes from Jeff Bernstein – Barclay. Jeff Bernstein – Barclay: Jim, in the U.S. business you mentioned the value focus being mission-critical. I was just wondering if you could talk about your U.S. product pipeline, other than coffee, in coming months and quarters and whether value will be more indicative or evidenced in those promotions going forward, relative to perhaps some context of your peers. And then you mentioned in the release and on the call the October comp remains strong. I believe that was a global comment. I’m just wondering whether it’s strong relative to September or are you seeing an uptick? We’ve heard recently of mix shifts lately, of comps slowing in the past month or two. I’m just wondering if you’re seeing anything like that? James A. Skinner: The trend we’re seeing right now is really consistent with what we just reported for the third quarter, for October. So I’m not going to say more about it but I would suggest that that means the trend is strong. We just reported the number for the third quarter and October is on trend to replicate that. Around the world. The other question was on the value. The U.S. company is taking under advisement with their franchisees, over the near term, what to do about the dollar menu. We have been looking at that relative to how to make that continue to be relevant for our customers, at the same time maintaining the dollar menu, but maybe adjustment of the lead sandwich. And they’re talking about that in the near term and I expect to have a decision soon. Other than the dollar menu and then the relationship of the food and the value, across the menu, which we’ve done a good job of representing here in the United States, I think that will continue as we move into 2009.

Your next question comes from Lawrence Miller - RBC Capital Markets. Lawrence Miller - RBC Capital Markets: There is a lot of focus on the credit markets here in the U.S. but it seems to be more of a global issue. And part of your strategy has been to refranchise the U.K. I was wondering if you could give us an update on what the credit markets are doing in that particular market. And then if you could just fill in a little bit of the sales color in those three markets over the quarter. You know there has been a lot reports that those markets are also seeing a slowdown in other retail sales and traffic.

First, on the credit markets, we are on plan and our franchisees have access to cash, specifically in the U.K. and Germany where we are doing the refranchising. So those deals are on plan. They were in the third quarter and will continue into the fourth and going forward. So no issues there. It takes a little bit longer to get the credit and it’s a little bit more expensive, as you would expect, but the access is there. As far as the other question, sales in Europe were strong throughout the geographies. We had a very strong summer and October continues the same way. The U.K., as we have mentioned before, has done a tremendous turnaround in the last 24 months and we have not seen any slowdown in that acceleration, even with what we hear out there in the market place. And the same thing with France. Germany had a softer September but it bounced back strong in October and that’s more promotional-related between the years.

Your next question comes from Steven Kron - Goldman Sachs. Steven Kron - Goldman Sachs: A question on the dollar menu. You mentioned a couple of times you expect a decision near term. That’s clearly something people are going to be focused on, on what you guys do there. You have been testing a bunch of different markets, a bunch of different things. At this point in time how well do you feel you have a sense for what the competitive response might be in those markets, the test markets at this point? And what would you anticipate competitor response to be to raising some prices? Would they follow or would that be a market share opportunity for them? James A. Skinner: First of all, you are assuming that we are going to be raising prices. I don’t know that that decision has been made yet, particularly regarding the overall dollar menu. I suggested that the U.S. is debating this issue right now and deciding which way they want to go in collaboration with their franchisees, who know how important it is to maintain the value relationship across the menu for our customers today. And that decision will be made soon and will then be communicated. But maybe Ralph would want to talk about what we suspect the competitors might do regarding this.

Quite honestly, we’re not worried about what they may or may not do. They’ve got the same pressures. You’ve seen their margins. You’ve got to manage this for the long term. We’ll do what’s right for the customers and what’s the right sustainable long-term value. And dollar menu will stay. There are just probably going to be some tweaks to it. But, as you noticed, in September we advertised the dollar menu strongly. And obviously we wouldn’t be doing that if we would be walking away from it.

Your next question comes from Jason West - Deutsche Bank Securities. Jason West - Deutsche Bank Securities: I know you have historically talked about 6% to 7% annual operating income growth. I just want to get your thoughts on that just given the big currency swing that we may see into 2009. Do you think that is still what you are thinking or is that more of a currency-neutral kind of number and I know you don’t give guidance but just where expectations are, are they reasonable given the big currency swing that we are going to see? James A. Skinner: I think they are. We have not considered changing our targets. I shouldn’t say that, we talk about it all the time, the fact is we think that our stated targets of 3% to 5% and 6% to 7% continue to be relevant and makes sense for us as we look at the future and as we measure the past. And so I think we’re probably going to be staying in that range. Peter J. Bensen: And just to clarify, we have always stated those targets exclude FX. So those are currency-neutral outlooks.

Your next question comes from David Palmer – UBS. David Palmer - UBS: The iced tea and iced coffee introductions are not really introductions in some cases, I guess just broadening of the offerings, and were a big success in the U.S. this summer. I’m wondering to what degree do you think that that lift might diminish as the season grows colder here in the U.S., and conversely, I guess about 25% of your U.S. stores should be ready to start selling specialty coffee beverages heading into the fourth quarter. Could that be a measurable lift to business this winter? Regarding Europe, could you perhaps update us, are you fully rolled out on the bridge operating platform in the Big Three market and could this kick off a more robust innovation cycle perhaps around chicken in the very near term in Europe? And could you comment on currency? Did you take any steps to hedge, like Pearce, Heinz, and Cooke seem to do, over the summer?

Our drink strategy throughout the summer was strong. It really helped our traffic. And items like the sweet iced tea are more of an everyday type of value. The iced coffee is more seasonal. And that’s where, not as much this winter, but as we continue going forward and we finish with the roll out, then you all into the hotter drinks of lattes and cappuccinos will help fill that gap. But we have continued with good value on our drinks and our drink volume continues up in October. So we are seeing that not be an issue. On the bridge operating platform, in the major countries we are rolled out enough, or almost at 100%, where we are able to do more of the chicken promotions. It’s part of the U.K. success. They have had premium products along with Snack Wraps and so we’re hitting chicken on both the value side and the premium price, similar to what we have been able to do in the U.S. And so that is benefitting us there, it’s benefitting us in Australia, also, and in Germany as we have been able to put that through the calendar. So you’re correct on that one. Peter J. Bensen: And regarding hedging, our treasury folks are constantly looking at the currency markets and our goal is to provide some stability and predictability. We can only hedge certain flows that come back and unlike some other companies, just a portion of our top line comes back to the U.S., so the pool of earnings that we can get hedge accounting for is probably smaller than other companies but we are constantly looking at the markets and being opportunistic when we put on positions.

Your next question comes from Tom Forte - Telsey Advisory Group. Tom Forte - Telsey Advisory Group: You have historically talked about the percentage of sales mix you get from the value menu. Can you update that number? And then when we think about the Monopoly promotion this year and how most of the items that have the game pieces on them are some of the higher priced items, how should we think about how that may perform in the environment now with consumers focusing more on value? James A. Skinner: First of all, the mix on dollar menu remains the same, 13% to 14%, and 70% from core, which is the real advantage of the dollar menu and the opportunity for us to continue to provide value across the menu.

[As to the Monopoly promotion,] that’s our strategy always with Monopoly, added value for more price and Monopoly is comping against last year’s Monopoly. Only offset by a week. So we did it in October last year and as we have said, the trends are strong, so it’s working well.

Your next question comes from Keith Siegner - Credit Suisse. Keith Siegner - Credit Suisse: I would like to ask a question about pricing. We have talked about the value menu. Just for the overall menu, and particularly on the core, one of the things that you have often highlighted has been the fact that your pricing has been running below CPI and this year it has been running well below food-at-home or grocery store pricing. We have heard recently several packaged food companies and a couple of grocers making resistance to pricing, particularly in September. Consider that beef trimmings are off, greens are off, from their peaks, company-operated margins are very high, how do you think about that pricing on the core menu going into next year?

We have got our demand-based pricing models and so we get pretty good information. Because we have a limited menu and we do a lot of transactions, the data we get is pretty rich as to resistance to price movements as we take them in different parts of the country. And so we understand where that resistance comes in and that affects what we’re willing to move. And so right now we continue to stay just below food-away-from-home. We think that’s the best index for us because that puts us where we believe value is most important, you know, directly from our competitors. But we do watch food-at-home and our value scores, a big part of our improvement, and they have improved significantly this year and we believe it’s because food-at-home has grown so much higher, that it makes our category a better deal than necessarily eating at home. As we look to next year, our pricing is that inflation will be similar to this year, is what we think right now, relative to food-away-from-home.

Your next question comes from Paul Westra - Cowen & Company. Paul Westra - Cowen & Company: Can you help us quantify or at least qualify your thoughts on the impact of what gasoline prices will do? Hopefully we are approaching up to $1.00 a gallon less year-over-year. Have you looked into that, how that hurt you on the way up and how it may hurt you on the way down and whether it will act like a stimulus check or not? James A. Skinner: We do keep an eye on it but we have said all along because of our convenience in value we sort of stayed above the noise, relative to the cost of gasoline. But relative to everything else, it is going down. It should help. It should be a positive factor rather than a negative factor.

And the big positive there is obviously disposable income. You know, we’re not as dependent on traffic as other brands may be, but gasoline is one of those discretionary income items, and that’s where we will get the benefit.

Your next question comes from Joseph Buckley – Banc of America Securities. Joseph Buckley – Banc of America Securities: One follow up to my first question and then a new one. Just your thoughts for 2009 in terms of food costs and the basket of goods. And could you update on what the renovation costs are, as you roll out the specialty coffee, and what portion of that McDonald’s is paying for versus the franchisees? And what sort of changing as you accelerate the roll out? Peter J. Bensen: Regarding 2009, obviously there is unprecedented volatility in the commodity markets right now. And so our supply chain folks are in the process of working through all that with our suppliers. I don’t have a number for you today, I will have a number in January. Directionally, though, with what’s going on today, if we see that continue, I have got to believe the increases will be less than they have been this year but I can’t verify exactly the number for you right now. In terms of our investment in the beverage business, we haven’t changed from what we originally stated at the beginning, which was it would probably cost about $100,000 on average to have the restaurant implement the beverage sale along with the drive-thru booth optimization. About $75,000 of that $100,000 was related to lease-hold improvements and things and $25,000 was equipment. We had agreed to pay up to 40% of the lease-holds. And so all of that is the same as when we rolled out the program. The actual costs are coming in slightly under but not meaningfully under the $100,000. So we think that’s still a good estimate. James A. Skinner: And I think it’s interesting that the number of people that are expanding their drive-thru footprint and putting the full package in place is greater than we had thought originally. And so when you hear this anecdotal information that we don’t have support and buy-in and we don’t have credit, that number is actually higher than what we originally thought it was going to be.

Your next question comes from Mitch Speiser – Buckingham. Mitch Speiser – Buckingham: I wanted to ask about the specialty coffee program as it relates to the experiences, I guess you’re in about 3,800 stores now. I would think at least 1,500 or so have had the program for over a year. Can you give us a sense of is it meeting your internal expectations? And can you give us a sense of how the drive-thru is working in terms of is it slower, quicker than average, and versus your internal expectations?

We are on track. We had about 500 restaurants that were on it for a year before making a decision to continue. It then allowed us to refine the operational pieces of the program and really work on the drive-thru booth, which is a big part of the roll out. And that’s why the take on the drive-thru booth has increased, because with those items, it helps improve the whole drive-thru operation and allows us to deliver this. Our scores that we do through both our internal measurements and mystery shops show that we continue to improve, as we have over the last few years, even in those restaurants that have put this in. And that was one of the key measures for us. We are on track on both the sales and the operational scores and it is a matter of getting the conversions done through the rest of the restaurants between here and sometime mid-next year.

Your next question comes from Rachael Rothman - Merrill Lynch. Rachael Rothman - Merrill Lynch: I just wanted to circle back on the franchisees and their attitude toward the value menu, because I know oftentimes those of us on the outside seem to make a mountain out of a molehill, but when I kind of look at your restaurant level margins in the U.S. year-to-date and see that they’re only down 20 basis points, and sales are up in the 3% to 4% range so cash flow per store is up, and I know that from past conversations franchisees actually have higher margins than the company-operated stores, when I look at the competitive set where sales may be up also in the 2% to 3% or 2% to 4% range and margins are down 150+ basis points, are franchisees really seeing the value menu, are they really pushing back against the value menu or are they seeing it as an opportunity to take market share, given that cash flow per store should up and it’s just those of us looking in from the outside are making something out of something that’s really nothing? James A. Skinner: Ralph and I had the pleasure of meeting with the franchisee leadership just last week and talked through the issues of the environment we find ourselves in today, and of course dollar menu was part of that discussion. But as I said in my comments, the operators are still committed to the dollar menu. And of course, as I said, we’re looking today at how we might make that more relative and continue to be profitable. Ralph, I think you might be closer to it than I am.

I think the reality is, no different than us. Operators being just slightly up in cash flow does not meet their expectations when they’re doing the investments they’re doing. And we’ve been aggressive on investments, whether it’s been reimaging or rebuild. We’ve done 1,000 rebuilds in the U.S. in the last five years. Or the investment we’re making in the combined beverage business now. So the commodity cost is one of those items that because we don’t control it, and operators don’t either, it is a sense of frustration. And that’s what you end up hearing. And rightly so. But they understand that we’re managing much better than the market place during this time. They understand the importance of everyday value and that we also understand with them that some level of migration on that value menu is important in order to keep the good value scores balanced across the menu. At some point. You can’t raise the price on everything else and leave dollar menu the same, as we have for six years, in inflationary times. And so that’s what we’re finding out. What do you do that still keeps the customers coming but keeps the balance of price value across the whole menu and not just great value on the dollar menu and average value on the rest. And those are the discussions that our operator body is having as we speak and that we’ve been having. I’m confident they will make the right decision because we have a lot of tests out there with good, robust data.

Your next question comes from Howard Penny - Research Edge. Howard Penny - Research Edge: Ralph, you just mentioned that you thought you would have the stores converted by mid-year next year. There are 3,800 stores today. I know there is a fairly rapid acceleration of the number of stores converted. But that sort of implies a significant acceleration of the number of stores converted to be able to get to that completion date, sort of midpoint next year. Is that realistic to think that you can do 11,000 to 12,000 stores in the next six months?

The biggest part, I always say is have you ever done a remodel on your kitchen at home. You know how difficult it is. Imagine doing 14,000 of them. And that’s what has been going on in the U.S. So the hardest part of that work is getting the drawings drawn for every single location, making sure you get all the fabrication going, etc., the permits and so forth. That part of it, which really is 2/3 of the time frame, we’ve got more than 10,000 restaurants that are completed through that piece. So even though there are only 3,800 open the majority of the restaurants are somewhere in that construction time line and we feel confident that it continues on path pretty close to where we thought we were going to be in the beginning, sometime in mid-year.

Your next question comes from Lawrence Miller - RBC Capital Markets. Lawrence Miller - RBC Capital Markets: I think it was maybe two years ago Wendy’s tried to move from a $0.99 menu to I think they called it a Value Choices menu or something where the prices went higher. As you study the competition, what do you think maybe didn’t work and you can learn from that going forward? And it looks like after the election there is maybe going to be a Democratic President, Democratic Congress. And as you think about the potential legislation that can go through in 2009, what impact should we be aware of on your business potentially in 2009? It looks like there might be an impact on labor with Check Card and minimum wage. Can you talk about that just briefly?

What we’ve done is we have studied our customer. We are not sure about Wendy’s customers. We know we obviously trade customers, but we have studied our customers, specifically our Dollar Menu customer, very strongly as to what are the motivating drivers, how much of it is that fact that it is a dollar, how much of the items are transaction drivers or how much of the visits are those are add-ons to, for example, extra value meals. And that’s how we’re making the decision. And we have been pretty up front that at this point we are going to stick with the name Dollar Menu. So that tells you a lot right there. And we think that is an important part of how our customers view this offering today. I’m not sure why they had the impact they had but we think we understand where our customers are on this one and know it’s not without risk, but understand the ramifications. James A. Skinner: And relative to the political environment, McDonald’s is a big company but at the same time it’s 32,000 small businesses. And so we operate in 32,000 communities around the world, and in the United States we operate in 10,000 communities. And it’s really about our franchisees and their ability to operate their businesses effectively, certainly with our support strategically and relative to our customer relevance and focus on the stores. So we’re not concerned, really, about who the next president is going to be relative to how we operate our business. We have been around for 52 years and operated under every administration, obviously successfully. Relative to the Employee Free Choice Act, there is concern in the market place and small businesses about this and particularly large businesses, where as you know, the potential new law would eliminate the requirement of a secret ballot to unionize, making it easier for unions, supposedly, to win elections. Instead of the secret ballot 50% or more of the employees simply have to check off an agreement. We feel, though, that if that legislation is adopted that because of our dispersed locations, the fact that each of these is a small business run by franchisees, with the exception of the 15% or 20% that are company owned, that those have to be done one at a time and that we are able to operate in that environment. And that our younger workers really, when it gets right down to the voting, I’m not sure want to spend their discretionary income on union dues are being unionized and not really a lot of benefit for them. So that’s sort of the way we look at the Employee Free Choice Act.

Your final question comes from Rachael Rothman - Merrill Lynch. Rachael Rothman - Merrill Lynch: On the franchise level margins, looking globally across the different regions, the franchise level margins seem to range from 78% or 79% and you’re up to somewhere up to 90% in Asia Pacific. As you continue to refranchise, how do should we think about what the target franchisee margin could be as we get to the end of 2009? Or how much opportunity is there for you to push that on a percentage basis and obviously the actual dollars would increase as well as franchising would become a larger portion of your business? Peter J. Bensen: The most dramatic impact we have on franchise margins is obviously driving comp sales. So Asia obviously is a lot higher because we have our Japanese joint venture there that pays us a royalty with no corresponding cost hitting the franchise margin line. So if you start at this year’s levels, your comp assumptions will be a bit part of where we are going to get to in 2009 because a lot of those occupancy costs are fixed. The disparity between regions is somewhat indicative of where we do more leasing versus property ownership, so you may know that in cases where we own the property we have no costs hitting the franchise margin because we don’t depreciate land, but if we lease sites we obviously have lease expense that is shown as an occupancy cost. The other impact is on our refranchising, as we are putting more restaurants in the hands of franchisees there is a greater proportion of lease sites are becoming franchised. So it is having a slightly negative impact on the franchise margin but by far the biggest impact is what are comps going to do to drive the top line.

And on that one, because a lot of that early refranchising activity that we did was in the U.K., which is a market place where we have a lot of leases, that actually has had a dilutive impact on franchise margins in Europe, but it has been more than offset by the strong comparable sales.

And now I will turn it over to Jim for some closing comments. James A. Skinner: Thanks for joining us this morning. In closing I want to reiterate my confidence and optimism for our continued business momentum. McDonald’s is operating from a position of strength. We have the right strategies in place and are on track to grow the business for the long term and are taking the necessary steps to manage through the current environment. Our strong operating results, predictable in growing free cash flow, and above target returns, add up to sustained profitable growth for our system and our shareholders.

This concludes today’s conference call.