TenQ

The McDonald's story

McDonald's earns rent and royalties from a largely franchised restaurant network, with the central question whether loyalty growth and its NEXT strategy can restore U.S. guest growth while making restaurants more efficient.

Written from McDonald's's own filings with the SEC, and rewritten when it publishes a new earnings release. Updated 2026-09-30.

  • $233.60share price, last close
  • $165.3Bmarket value
  • 21/36TenQ Score checks passed
  • 9.2%growth a year the price assumes

The story in brief

  • Franchises define the business. Franchisees operate 96% of McDonald's restaurants, supporting a rent and royalty business with a 46.2% operating margin.
  • Loyalty outpaces guest traffic. Loyalty member sales increased over 20% over the trailing twelve months to June 2026, but U.S. comparable guest counts declined in the quarter to June 2026.
  • Cash growth must accelerate. The reverse DCF implies 9.2% annual growth in free cash flow after stock pay for ten years, compared with 4.8% delivered over the last 10 years.

What drives the business

  • McDonald's has 46,028 restaurants, with franchisees operating 44,016 and the company operating 2,012, so franchise restaurant sales drive the rent and royalties it collects rather than appearing directly as company revenue.
  • Its NEXT strategy, detailed in September 2026, seeks 1.5 percentage points of market share gains in both chicken and beverages by 2030 while maintaining its leadership in beef.
  • International Operated Markets generated $3.6 billion, or 51% of revenue, in the quarter to June 2026, ahead of the U.S. segment at $2.8 billion.
  • Across 70 loyalty markets, sales to loyalty members increased over 20% to $40 billion over the trailing twelve months to June 2026, with nearly 220 million 90-day active users at period end, up 13%.
  • Operating income excluding restructuring charges increased 4% in the quarter to June 2026, supported by higher sales-driven franchised margins and higher other operating income, partly offset by higher general and administrative expenses.

What the price assumes

At $233.60, the reverse DCF implies that free cash flow after stock pay grows 9.2% a year for ten years, using a 10.2% discount rate.

McDonald's delivered 4.8% annual growth on that measure over the last 10 years, while the TenQ check sets a 4.4% bar by slowing that record halfway to 4%.

The 4.7% free cash flow yield exceeds its historical 3.8%, but the implied cash growth still exceeds both the delivered record and the TenQ check's bar.

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What could change the story

  • U.S. comparable sales increased 0.8% in the quarter to June 2026 because higher average checks, including favorable product mix, outweighed declining comparable guest counts, leaving growth dependent on spending per visit rather than more visits.
  • Revenue growth of 6.3% over the last twelve months improved on the 5.1% annual pace over the last three years but remained below the TenQ sector comparison of 9.4%.
  • Total debt of $39.9 billion against $822 million in cash and short-term investments, negative equity and a liquidity ratio of 1.08 below the TenQ bar of 1.50 limit balance sheet flexibility.
  • Cash returned to shareholders used 97.3% of free cash flow, leaving little room within that cash flow if operating performance weakens.

What to watch next

  • The September 2026 NEXT announcement calls for an operating margin in the low-to-mid 50% range by 2030 and approximately 250 basis points of gross restaurant-level efficiency gains, making progress from the 46.2% operating margin a key measure.
  • Following Skye Anderson's appointment as President of McDonald's USA in August 2026, the next releases will show whether U.S. comparable guest counts improve alongside comparable sales and loyalty engagement.
  • Further restructuring charges and administrative expense growth will show how much of the franchise margin improvement reaches operating income, following $52 million in restructuring charges in the quarter to June 2026.

Sources

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