The travails at the UK operation of McDonald's are set to cost it at least $40m (£23m), the company has told its investors.

McDonald's is closing 25 restaurants in the UK during the first three months of this year. The loss will be made on cancelling leases and other charges.

In addition to the closure, McDonald's is refranchising at least 50 stores that are currently operated by the company.

Elsewhere in the world McDonald's is buying out franchises. It has reached an agreement with its franchisees in Brazil to buy them out at a cost of about $20m (£11.4m). The franchisees had been taking legal action against McDonald's.

The poor UK performance dragged profit margins down at McDonald's European company-owned estate to 14.9% in 2005, compared with 15.6% in 2004. This is the first time that McDonald's has disclosed the profit margins at its company-owned restaurants.

Worldwide, profit margins fell to 15% in 2005, from 15.3% in 2004. The company manages 8,000 of the 31,000 restaurants around the world.

By Andrew Sangster
 

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