- Company name
- McDonald's
- Sector
- Restaurants
- About
- McDonald's is the largest restaurant company in the world, with about 46,000 restaurants in more than 100 countries. Franchisees run about 95% of them. McDonald's makes most of its money from rent and royalties, which are a percentage of each restaurant's sales. It owns about 56% of the land and 80% of the buildings of the restaurants in its main markets, so rent is its largest source of profit. In 2025, franchised restaurants gave about 90% of its restaurant margin, and free cash flow was about $7.2 billion. It reports three segments: the US, International Operated Markets (such as Germany, the UK, and Australia), and International Developmental Licensed Markets (such as Japan and China), where partners run the business. Its loyalty program had about 220 million active members in Q2 2026. McDonald's has raised its dividend every year for 50 years.
- Thesis
- McDonald's trades at a discount because fewer customers visit its US restaurants, and the plan to fix this costs money now. In Q2 2026, US same-store sales grew only 0.8%, from higher prices, while the number of guests fell. Third-party data (Placer.ai) showed US visits down 4.5%, against 3.0% for the industry. Lower-income customers, who are a large part of McDonald's visitors, cut back the most. At its Investor Day on September 23, 2026, McDonald's promised about $8.5 billion of rent relief and capital support to franchisees through 2036, and moved its 50,000-restaurant goal from 2027 to 2028. Investors see cash that goes out now for benefits that come over ten years, and the stock had its worst day since March 2020. Higher interest rates add a second pressure. The 10-year Treasury yield rose above 5% in September 2026, and this lowers the price investors pay for steady rent and royalties. For the gap to close, US guest counts must stop falling and turn positive in 2027, the new value menu (Extra Value Meals) must bring customers back without cutting franchisee profit, and McDonald's must keep its investment-grade credit rating while it pays the dividend and funds the franchisee plan. The first test is the Q3 2026 report, expected in late October or early November 2026, and above all what management says about US traffic in October. If traffic recovers, the discount can close over the next four to six quarters. The main risk is that the consumer stays weak and the $8.5 billion goes to a franchise system that sells less.
- Risks
- Fewer customers visit McDonald's US restaurants. US guest counts fell in Q2 2026, and the CFO expected US same-store sales to be slightly negative in Q3. About 36% of McDonald's US visitors come from lower-income areas, and these customers cut back the most. Competitors also push low-price deals. If traffic does not recover, rent and royalties grow slowly.
The $8.5 billion franchisee plan costs money now, and its benefits come over about ten years. Rent relief lowers McDonald's highest-margin income. Analysts estimate it cuts earnings per share by about 1% in 2027 and 2028, and by 2% to 3% by 2030. Only 60% to 65% of franchisees used the new value prices in Q2 2026, so franchisee support is not certain.
Higher interest rates lower the price investors pay for steady rent and royalties. The 10-year Treasury yield rose above 5% in September 2026, and the stock fell about 14% in one month. The direct cost is small, because about 97% of McDonald's debt has a fixed rate, at an average of about 4.0%.
McDonald's had about $39.9 billion of debt at June 30, 2026, about 2.6 times EBITDA, and its shareholders' equity is negative because of past buybacks. In 2025, dividends and buybacks used about all of its free cash flow. The franchisee plan leaves less cash for buybacks. Its credit ratings are BBB+ at S&P and Baa1 at Moody's.
Sales outside the US are slowing too. Same-store sales grew only 1.5% in International Operated Markets and 1.9% in International Developmental Licensed Markets in Q2 2026. China and the Middle East add political risk, and a strong US dollar lowers the value of foreign sales.
Weight-loss drugs such as GLP-1s can reduce how much people eat out. Higher beef prices and higher minimum wages, such as California's $20 fast-food wage, lower franchisee profit first, and this can slow new restaurant openings. A food-safety problem, such as the E. coli outbreak in October 2024, can also cut traffic for months. A proposed class action filed in October 2026 alleges that McDonald's pricing tool breaks antitrust law. The case is at an early stage.
- Balance sheet
- McDonald's shows negative shareholders' equity: a deficit of $1.0 billion at June 30, 2026. Over many years, it has used cash flow and debt to buy back $80.5 billion of its own stock (treasury stock at cost). This is not a sign of distress. The company owns much of the land and buildings that franchisees rent, and it carries this property at old cost. Rent and royalties give a steady cash flow. Debt was $39.9 billion at June 30, 2026, mostly unsecured notes of the parent, plus $14.0 billion of long-term lease liabilities. At December 31, 2025, 97% of the debt had a fixed rate, the average rate was 4.0%, and 39% was in foreign currencies. Net debt of about $39.1 billion was about 2.6 times EBITDA of about $15.1 billion over the 12 months to June 2026. In the first half of 2026, operating income of $6.29 billion covered interest expense of $809 million about 7.8 times. Liquidity comes from cash of $822 million, a $5.0 billion commercial paper program and an unused $4.0 billion committed credit line to June 2028. About $3.2 billion of debt matures in 2027 and $5.2 billion in 2028. S&P rates the long-term debt BBB+ and Moody's rates it Baa1 (10-K, February 2026). In 2025, dividends of $5.1 billion and buybacks of $2.1 billion used almost all of the $7.2 billion of free cash flow. In September 2026, McDonald's set a plan to give franchisees about $8.5 billion of rent relief and capital support through 2036. This leaves less cash for buybacks, unless debt rises.
As of 2026-06-30.
- Checkpoints
- Nov 4, 2026 (estimate): Q3 2026 results: US guest counts and same-store sales. Pending. Watch: US same-store sales near zero or better, with guest counts that stop falling in October, pass; a further fall in US traffic or a cut to the outlook fails.
Feb 2027 (estimate): Full-year 2026 results and 2027 outlook. Pending. Watch: A 2027 outlook with positive US guest counts and free cash flow conversion in the mid-80% range passes; lower guidance or higher debt to fund the franchisee plan fails.
May 2027 (estimate): Q1 2027 results: value menu and franchisee profit. Pending. Watch: Positive US guest counts with stable franchisee cash flow pass; traffic that still falls after the Extra Value Meals push fails.
- Recent events
- 2026-10-06: Bloomberg reported that some US franchisees object to the cost of the restaurant upgrades in the new plan, at least $800,000 per restaurant.
2026-10-02: A customer filed a proposed class action against McDonald's in a US federal court in Illinois. It alleges that McDonald's AI-enhanced pricing tool shares nonpublic store data with franchisees and helps raise menu prices, against antitrust law. McDonald's said that the suit is "filled with inaccuracies", that franchisees set menu prices, and that it will defend itself.
2026-09-28: Melius Research kept its Sell rating and cut its price target to $230 from $250.
2026-09-24: After Investor Day, several analysts cut their price targets: Morgan Stanley to $297, TD Cowen to $270, and Evercore ISI to $300. BMO kept $310. Evercore lowered its 2027 to 2030 estimates by about 3% because of the rent relief, more refranchising, and slower US sales.
2026-09-23: At its Investor Day, McDonald's promised about $8.5 billion of rent relief and capital support to franchisees through 2036, about $5 billion of it by 2030. It said the plan adds about $100,000 of cash flow a year to an average US restaurant. Its 2030 targets include an operating margin in the low-to-mid 50% range and a franchised share of about 98% by the end of 2028. The CEO said industry traffic will stay flat while inflation stays high. The stock fell 4.81% that day, its worst day since March 2020.
2026-09-17: McDonald's raised its quarterly dividend by 4% to $1.93 per share. This is its 50th annual increase in a row.
2026-08-04: McDonald's reported Q2 2026 results. Revenue was $7.10 billion, up 4%. Adjusted EPS was $3.38, up 6%. Global same-store sales grew 1.3%, and US same-store sales grew 0.8%, with fewer guests. Management said most of the US shortfall came from weak execution of its value menu. It moved the 50,000-restaurant goal from 2027 to 2028. Skye Anderson replaced Joe Erlinger as president of McDonald's USA.
2026-07-24: Third-party foot-traffic data (Placer.ai) showed McDonald's US visits down 4.5% in Q2 2026 from a year earlier, against 3.0% for the fast-food industry.
2026-05-07: McDonald's reported Q1 2026 results. Revenue was $6.52 billion, up 9%. Adjusted EPS was $2.83. Global same-store sales grew 3.8%, and US same-store sales grew 3.9%, mostly from higher prices.
2026-02-11: McDonald's reported Q4 and full-year 2025 results. Global same-store sales grew 5.7% in Q4, and US same-store sales grew 6.8%. Full-year adjusted EPS was $12.20. For 2026, it planned about 2,600 new restaurants, about 2,100 net of closures.