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MCDONALDS CORP

MCD
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Business Summary

McDonald's Corporation franchises and operates McDonald's restaurants in the global restaurant industry, serving a locally relevant menu of quality food and beverages in communities across more than 100 countries. The Company's reporting segments are aligned with its strategic priorities and include the United States, International Operated Markets, and International Developmental Licensed Markets & Corporate, which includes the results of over 75 countries as well as Corporate activities.

McDonald's restaurants compete with international, national, regional and local retailers of traditional, fast casual and other food service competitors within the informal eating out segment, which is inclusive of the Company's primary competition of quick-service restaurants, but also includes 100% home delivery/takeaway providers, convenience stores, street stalls or kiosks, cafés, specialist coffee shops, self-service cafeterias and juice/smoothie bars. The Company competes among quick-service restaurants primarily on the basis of price, convenience, service, experience, menu variety and product quality.

The Company is primarily a franchisor and believes franchising is paramount to delivering great-tasting food, locally relevant customer experiences and driving profitability. The Company's revenues consist of sales by Company-owned and operated restaurants and fees from franchised restaurants operated by conventional franchisees, developmental licensees and affiliates. Fees vary by type of site, amount of Company investment, if any, and local business conditions, and these fees, along with occupancy and operating rights, are stipulated in franchise/license agreements that generally have 20-year terms. The Company's Other revenues are comprised of fees paid by franchisees to recover a portion of costs incurred by the Company for various technology and digital platforms and revenues from brand licensing arrangements to market and sell consumer packaged goods using the McDonald's brand.

McDonald's menu features hamburgers and cheeseburgers, the Big Mac, the Quarter Pounder with Cheese, the Filet-O-Fish, and several chicken sandwiches like the McChicken, McCrispy and McSpicy, as well as Chicken McNuggets, World Famous Fries, shakes, McFlurry frozen desserts, sundaes, soft serve cones, cookies, pies, soft drinks, coffee, McCafé beverages and other beverages. McDonald's restaurants in the U.S. and many international markets offer a full or limited breakfast menu, which may include breakfast sandwiches such as the Egg McMuffin, Sausage McMuffin with Egg and McGriddles, biscuit and bagel sandwiches, oatmeal, hash browns, breakfast burritos and hotcakes. In addition to these menu items, restaurants sell a variety of other products during limited-time promotions.

The Company's Accelerating the Arches growth strategy encompasses all aspects of McDonald's business as the leading global omni-channel restaurant brand, with growth pillars to Maximize Marketing, Commit to the Core menu, and Double Down on the 4D's: Digital, Delivery, Drive Thru and Restaurant Development. The Company has loyalty programs in 70 markets, including nearly all major markets, and plans to increase its 90-day active users to 250 million by the end of 2027 and grow its annual Systemwide sales to loyalty members to $45.0 billion by the end of 2027. The Company offers delivery from nearly 41,000 restaurants across approximately 100 markets, representing approximately 90% of McDonald's restaurants, and has the most drive thru locations worldwide with nearly 29,000 drive thru locations globally, including over 95% of the approximately 13,700 locations in the U.S.

In 2025, global comparable sales increased 3.1% , with the U.S. increasing 2.1% , International Operated Markets increasing 3.2% , and International Developmental Licensed Markets increasing 4.6% . Consolidated revenues increased 4% to $26.9 billion , Systemwide sales increased 7% to $139.4 billion , and consolidated operating income increased 6% to $12.4 billion . The Company opened nearly 2,300 new restaurants across the System and returned a total of $7.1 billion to shareholders through dividends and share repurchases in 2025 .

In 2025, net income increased 4% to $8,563 million and diluted earnings per common share increased 5% to $11.95 . Cash provided by operations was $10.6 billion , a 12% increase from the prior year, and free cash flow was $7.2 billion , an 8% increase from the prior year. Capital expenditures of $3.4 billion were mainly allocated to new restaurant openings and, to a lesser extent, to reinvestment in existing restaurants.

Business Outlook

The Company expects net restaurant unit expansion will contribute approximately 2.5% to 2026 Systemwide sales growth, in constant currencies . The Company expects full year 2026 Selling, general and administrative expenses of about 2.2% of Systemwide sales . The Company expects 2026 operating margin percent to be in the mid-to-high 40% range . Based on current interest and foreign currency exchange rates, the Company expects interest expense for the full year 2026 to increase between 4% and 6% driven primarily by higher average interest rates . The Company expects the effective income tax rate for the full year 2026 to be between 21% and 23% . The Company expects 2026 capital expenditures to be between $3.7 and $3.9 billion , with the majority directed towards new restaurant unit expansion across the U.S. and International Operated Markets. The Company expects to achieve a free cash flow conversion rate in the low-to-mid 80% range for 2026 .

The Company plans to continue to accelerate the pace of restaurant openings and technology innovation. In 2026, the Company plans to open approximately 2,600 new restaurants (gross) across the globe , which will contribute to slightly over 4.5% new unit growth (net of closures) . The Company is progressing toward the targeted expansion to 50,000 restaurants by the end of 2027 , which would make it the fastest period of restaurant unit growth in Company history. The Company expects approximately 2,100 net restaurant additions in 2026 , with about 750 restaurants opening in the U.S. and International Operated Markets , and developmental licensees and affiliates contributing capital towards more than 1,800 restaurant openings in their respective markets . The Company also expects a sequential increase in capital expenditures of about $300 million to $500 million for 2027 , targeting 50,000 global units by the end of 2027.

The Company plans to increase its 90-day active loyalty users to 250 million by the end of 2027 and grow its annual Systemwide sales to loyalty members to $45.0 billion by the end of 2027 . The Company expects to increase the percentage of Systemwide delivery sales originating from its mobile app to 30% by the end of 2027 . The Company continues to build on its drive thru advantage, as the vast majority of new restaurant openings in the U.S. and International Operated Markets will include a drive thru.

The Company expects 2026 operating margin percent to be in the mid-to-high 40% range . The Company expects full year 2026 Selling, general and administrative expenses of about 2.2% of Systemwide sales .

The Company expects 2026 capital expenditures to be between $3.7 and $3.9 billion , with the majority directed towards new restaurant unit expansion across the U.S. and International Operated Markets. The Company expects to achieve a free cash flow conversion rate in the low-to-mid 80% range for 2026 . The Company also expects a sequential increase in capital expenditures of about $300 million to $500 million for 2027 .

The Company expects 2026 capital expenditures to be between $3.7 and $3.9 billion . The Company expects to achieve a free cash flow conversion rate in the low-to-mid 80% range for 2026 .

The Company expects net restaurant unit expansion will contribute approximately 2.5% to 2026 Systemwide sales growth, in constant currencies . The Company expects full year 2026 Selling, general and administrative expenses of about 2.2% of Systemwide sales . The Company expects 2026 operating margin percent to be in the mid-to-high 40% range . Based on current interest and foreign currency exchange rates, the Company expects interest expense for the full year 2026 to increase between 4% and 6% driven primarily by higher average interest rates . The Company expects the effective income tax rate for the full year 2026 to be between 21% and 23% .

The Company expects 2026 capital expenditures to be between $3.7 and $3.9 billion . The Company expects to achieve a free cash flow conversion rate in the low-to-mid 80% range for 2026 .

Risk Factors

The Company faces intense competition in the informal eating out segment, which is highly competitive and includes traditional, fast casual and other competitors, as well as non-traditional market participants such as convenience stores, grocery stores, coffee shops and online retailers. The Company's heavily franchised business model presents risks, as the revenues realized from franchised restaurants are largely dependent on the ability of franchisees to grow their sales, and if franchisee sales trends worsen, financial results could be negatively affected. Supply chain interruptions and related price increases have in the past and may in the future adversely affect the Company, as certain items have limited suppliers, increasing reliance on those suppliers. The Company is subject to increasing regulatory and legal complexity worldwide, including laws and regulations involving advertising, franchising, health, safety, environment, competition, zoning, employment and taxation, which could increase costs and exposure to litigation. Changes in commodity and other operating costs, including labor, could adversely affect results of operations, as the commodity markets for ingredients such as beef and chicken are particularly volatile due to factors beyond the Company's control.

Management Priorities

Management's message emphasizes the Company's Accelerating the Arches growth strategy, which encompasses all aspects of McDonald's business as the leading global omni-channel restaurant brand, with growth pillars to Maximize Marketing, Commit to the Core menu, and Double Down on the 4D's: Digital, Delivery, Drive Thru and Restaurant Development. The Company expects net restaurant unit expansion will contribute approximately 2.5% to 2026 Systemwide sales growth, in constant currencies . The Company expects full year 2026 Selling, general and administrative expenses of about 2.2% of Systemwide sales . The Company expects 2026 operating margin percent to be in the mid-to-high 40% range . The Company expects 2026 capital expenditures to be between $3.7 and $3.9 billion . The Company expects to achieve a free cash flow conversion rate in the low-to-mid 80% range for 2026 .

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 7, MD&A — 2025 Financial Performance
  2. [2] Item 7, MD&A — 2025 Financial Performance
  3. [3] Item 7, MD&A — 2025 Financial Performance
  4. [4] Item 7, MD&A — 2025 Financial Performance
  5. [5] Item 7, MD&A — 2025 Financial Performance
  6. [6] Item 7, MD&A — 2025 Financial Performance
  7. [7] Item 7, MD&A — 2025 Financial Performance
  8. [8] Item 7, MD&A — 2025 Financial Performance
  9. [9] Item 7, MD&A — 2025 Financial Performance
  10. [10] Item 7, MD&A — Net Income and Diluted Earnings Per Common Share
  11. [11] Item 7, MD&A — Net Income and Diluted Earnings Per Common Share
  12. [12] Item 7, MD&A — Cash Flows
  13. [13] Item 7, MD&A — Cash Flows
  14. [14] Item 7, MD&A — 2025 Financial Performance
  15. [15] Item 7, MD&A — Outlook
  16. [16] Item 7, MD&A — Outlook
  17. [17] Item 7, MD&A — Outlook
  18. [18] Item 7, MD&A — Outlook
  19. [19] Item 7, MD&A — Outlook
  20. [20] Item 7, MD&A — Outlook
  21. [21] Item 7, MD&A — Outlook
  22. [22] Item 7, MD&A — Strategic Direction
  23. [23] Item 7, MD&A — Strategic Direction
  24. [24] Item 7, MD&A — Strategic Direction
  25. [25] Item 7, MD&A — Outlook
  26. [26] Item 7, MD&A — Outlook
  27. [27] Item 7, MD&A — Outlook
  28. [28] Item 7, MD&A — Outlook
  29. [29] Item 7, MD&A — Strategic Direction
  30. [30] Item 7, MD&A — Strategic Direction
  31. [31] Item 7, MD&A — Strategic Direction
  32. [32] Item 7, MD&A — Outlook
  33. [33] Item 7, MD&A — Outlook
  34. [34] Item 7, MD&A — Outlook
  35. [35] Item 7, MD&A — Outlook
  36. [36] Item 7, MD&A — Outlook
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  40. [40] Item 7, MD&A — Outlook
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  47. [47] Item 7, MD&A — Outlook
  48. [48] Item 7, MD&A — Outlook
  49. [49] Item 7, MD&A — Outlook
  50. [50] Item 7, MD&A — Outlook
  51. [51] Item 8, Consolidated Statement of Income
  52. [52] Item 8, Consolidated Statement of Income
  53. [53] Item 8, Consolidated Statement of Income
  54. [54] Item 8, Consolidated Statement of Income
  55. [55] Item 8, Consolidated Statement of Income
  56. [56] Item 8, Consolidated Statement of Income
  57. [57] Item 8, Consolidated Statement of Income
  58. [58] Item 8, Consolidated Statement of Income
  59. [59] Item 7, MD&A — Operating Income
  60. [60] Item 7, MD&A — Operating Income
  61. [61] Item 8, Consolidated Statement of Cash Flows
  62. [62] Item 8, Consolidated Statement of Cash Flows
  63. [63] Item 7, MD&A — Cash Flows
  64. [64] Item 7, MD&A — Cash Flows
  65. [65] Item 8, Consolidated Balance Sheet
  66. [66] Item 8, Consolidated Balance Sheet
  67. [67] Item 7, MD&A — Operating Income
  68. [68] Item 7, MD&A — Operating Income
  69. [69] Item 7, MD&A — Operating Income
  70. [70] Item 7, MD&A — Operating Income
  71. [71] Item 7, MD&A — Operating Income
  72. [72] Item 7, MD&A — Operating Income

Analysis on 6/8/2026