McDonald’s in 2026: A Great Franchise, but What Is the Stock Worth?

McDonald’s in 2026: A Great Franchise, but What Is the Stock Worth?

World in Stats | Published 28 October 2026 | Research cutoff 25 October 2026
NYSE: MCD | Reference price: $248.46, 23 October 2026 close | Figures in USD

Valuation disclosure: This research uses examined filings and a reproducible scenario model. The valuation relies on lease and dilution proxies and is not a fully verified price target. The financial assumptions and unresolved limitations are disclosed below.

Executive summary

McDonald’s remains an unusually powerful consumer franchise. Its brand, locations, purchasing scale and operating system help it earn rent and royalties from a broad restaurant network. But a high-quality business is not automatically a bargain, and the 2026 investment case includes an expensive effort to improve restaurant execution and customer traffic.

The latest examined statements cover June 2026. Reconstructed trailing revenue was $27.70 billion and operating income $12.81 billion. Cash from operations less cash capital expenditures was $7.76 billion. The newly declared annualized dividend of $7.72 yields about 3.11% at the reference price, before investor-level taxes or currency effects. [2025; q2_2026; dividend; prices]

Our illustrative scenarios produce approximately $95, $203 and $336 per share. The wide range reflects different growth, profitability, investment and discount-rate assumptions. It is more honest than presenting a single precise fair value.

Key takeaways

• Franchising makes the parent highly profitable, while franchisee profitability remains essential.
• U.S. sales growth has not yet demonstrated a convincing recovery in customer traffic.
• Dividend coverage is reasonable on recent cash flows; investment and debt limit flexibility.
• NEXT offers productivity upside but also commits substantial support to restaurant operators.
• The reference price requires stronger performance than our base scenario.

The business behind the Golden Arches

Conceptual AI-generated editorial illustration; not a source of financial data.

McDonald’s earns money from franchised restaurants, directly operated restaurants and other activities such as technology cost recovery and licensing. Franchisees’ sales are not consolidated as the parent’s revenue. Instead, franchise arrangements generate rent, royalties and fees. That distinction explains why corporate revenue can move differently from total restaurant sales.

In 2025, franchised revenue was $16.55 billion, including $10.44 billion of rent and $6.02 billion of royalties. Company-operated restaurant sales were $9.69 billion. Property control gives McDonald’s an economic interest in restaurant locations as well as the consumer brand. It also means calling the company entirely asset-light misses an important part of the balance sheet. [2025]

The three reporting groups are the U.S., International Operated Markets and International Developmental Licensed Markets & Corporate. The last includes corporate costs and should not be interpreted as a pure restaurant-market profit margin. Revenue and earnings are exposed to exchange rates as well as local consumer demand.

Industry and competitive advantages

Conceptual AI-generated editorial illustration; not a source of financial data.

McDonald’s competes for eating occasions, not just hamburger purchases. Burger King, Taco Bell, KFC, coffee shops, convenience stores and home meals all matter. Its advantages include brand recognition, convenient locations, marketing reach, purchasing power and a tested operating system for franchisees.

Customer switching costs are low. A loyalty app can help personalize offers without creating the kind of network effect associated with a communications platform. Scale offers tools; restaurant execution determines whether customers return.

Q2 global comparable sales increased 1.3%, with the U.S. up 0.8% and U.S. guest counts negative. In the same quarter, RBI reported 8.5% comparable growth at Burger King U.S. and Yum! reported 7% same-store growth at Taco Bell U.S. These are not precise market-share calculations, but they challenge any assumption that McDonald’s competitive position guarantees superior growth. [q2_2026; rbi; yum]

Management and capital allocation

The compensation framework includes EPS, ROIC and relative shareholder-return measures. Those create useful alignment but require interpretation: EPS can rise because shares fall, while ROIC based on accounting capital can be affected by old asset values and repurchases. The combined chairman/CEO role makes independent board challenge important. [proxy2026]

The most revealing capital-allocation test is whether investment improves restaurant economics and per-share cash generation. In 2025, dividends and cash repurchases consumed almost all FCF before other investing demands. Repurchases should therefore depend on valuation and system investment needs, rather than a desire to maintain a headline distribution rate.

Financial history

Conceptual AI-generated editorial illustration; not a source of financial data.

Year	Revenue	EBIT	Net income	EPS	CFO	Cash capex	FCF
2016	24,773	7,744	4,686	5.44	6,060	1,821	4,238
2017	22,960	9,553	5,192	6.37	5,551	1,854	3,698
2018	21,258	8,823	5,924	7.54	6,967	2,742	4,225
2019	21,364	9,070	6,025	7.88	8,122	2,394	5,728
2020	19,208	7,324	4,730	6.31	6,265	1,641	4,624
2021	23,223	10,356	7,545	10.04	9,142	2,040	7,102
2022	23,183	9,371	6,177	8.33	7,387	1,899	5,488
2023	25,494	11,647	8,469	11.56	9,612	2,357	7,255
2024	25,920	11,712	8,223	11.39	9,447	2,775	6,672
2025	26,885	12,393	8,563	11.95	10,551	3,365	7,186

USD millions except EPS. FCF = CFO − cash capex. Historical sources and presentation changes are documented in the full report and CSV. Revenue includes retrospective other-revenue presentation for older years.

The record shows why revenue alone is an incomplete guide. Refranchising can reduce consolidated sales while increasing the share of high-margin fees. The pandemic disrupted 2020; Russia disposal costs affected 2022. Earnings, cash flow and EPS should be considered together rather than reducing the business to a single compound growth rate.

Profitability and ROIC

The 2025 operating margin was 46.1%; FCF margin was 26.7%. Parent-level profitability is attractive, but it should not be confused with the return earned by a typical franchisee.

Our transparent ROIC proxy uses EBIT after a normalized 22% tax rate divided by average debt plus equity less cash. It suggests strong returns, but is not a fully lease-adjusted economic ROIC. Book equity is negative, making conventional ROE unhelpful. Historical-cost property, affiliate earnings and lease treatment all complicate comparisons with other restaurant companies. The final institutional version needs a more complete capital reconstruction.

Cash flow, balance sheet and earnings quality

Conceptual AI-generated editorial illustration; not a source of financial data.

June 2026 accounts showed cash of $822 million and carrying debt of $39.86 billion, plus $14.73 billion of total lease liabilities. Operating and finance leases must be distinguished in valuation. Subtracting every lease liability while also deducting operating rents in forecast cash flow would double count costs. [q2_2026]

TTM FCF of $7.76 billion is after financial interest and before acquisitions and finance-lease principal. It is not unlevered FCFF. Working-capital improvement supported the recent CFO increase, so the entire improvement should not be extrapolated as structural growth.

One source inconsistency needs editorial attention: the 2025 cash-flow narrative describes a decline in FCF, but the statement arithmetic gives $7.19 billion versus $6.67 billion in 2024, an increase of 7.7%. This article uses the statement calculation and leaves the narrative discrepancy explicitly unresolved. [2025]

Growth outlook: what NEXT changes

September’s strategy update targets low-to-mid-50% operating margins by 2030 and about 250 basis points of gross restaurant-level efficiency. It also sets out approximately $8.5 billion of partnering support through 2036, including roughly $5 billion through 2030, through rent relief and capital assistance. These are company targets, not results. [next]

The economics matter more than the slogan. Better throughput, simpler operations and improved hospitality could increase visits and operator cash flow. Yet capex arrives before benefits, rent relief reduces parent income, and technology investment does not always achieve the intended return.

Our base scenario assumes revenue growth of 4% for five years and 3% thereafter, with operating margin reaching 51.5% over four years. It does not assume the full benefit of every management initiative. It also retains meaningful cash investment and finance-lease asset additions.

What the DCF says

Conceptual AI-generated editorial illustration; not a source of financial data.

The model forecasts ten forward annual periods, discounts FCFF and then deducts financial and finance-lease debt while adding cash. Operating leases stay in operating expense. Terminal growth requires reinvestment tied to an assumed terminal ROIC; the model does not assume perpetual growth is free.

Scenario	Growth Y1–5 / Y6–10	End EBIT margin	WACC / terminal g	EV ($bn)	Equity ($bn)	Value/share
Bear	2.0% / 2.0%	45.0%	9.5% / 2.0%	108.9	67.5	$95
Base	4.0% / 3.0%	51.5%	8.2% / 2.5%	185.4	144.0	$203
Bull	6.0% / 4.0%	54.0%	7.5% / 3.0%	280.3	238.9	$336

The base WACC is 8.25%, informed by a 5.00% Treasury benchmark and explicitly assumed equity-risk premium, beta and marginal debt cost. The scenarios use different rates as well as operating assumptions. They are illustrations of uncertainty, not equally likely outcomes or analyst consensus. [treasury]

Base enterprise value is about $185.4 billion. After the disclosed bridge it becomes approximately $144.0 billion of equity value, or $203 per diluted-share proxy. About 60% of enterprise value comes from the terminal period, highlighting the sensitivity to long-term economics.

The bridge uses June debt and cash, December 2025 finance-lease debt of $2.35 billion as a proxy, and an assumed dilution buffer. Affiliate earnings remain in EBIT without a separate added investment value. Their conversion into unlevered cash flow requires further reconciliation. These are material limitations; the output is not a certified fair value.

Reverse DCF: what does the price require?

Holding the base margin trajectory and other assumptions constant, approximately 5.6% annual revenue growth for ten years reproduces $248.46. If revenue follows the slower base path, a constant margin of roughly 59.5% in every forecast year would instead be required. These are separate mathematical experiments, not simultaneous forecasts.

The market can justify the same price through many combinations of growth, margins, investment and required returns. The useful conclusion is conditional: the reference price leaves less room for mediocre execution than a dividend-focused narrative alone might suggest.

Relative valuation

The reference price is about 20.2 times approximately reconstructed trailing diluted EPS. Equity FCF yield is about 4.4%. Conventional EV/EBIT is around 16.8 times before finance leases, or about 17.0 times including the lease proxy.

Company	Price	Revenue TTM	EBIT margin	P/E¹	EV/EBIT²	FCF yield³
MCD	$248.46	27,702	46.2%	20.2×	17.0×	4.4%
YUM	$149.70	8,722	31.0%	18.9×	19.4×	4.1%
QSR	$75.34	9,699	26.9%	18.9×	17.9×	4.8%

These reported-basis ratios use the same market observation date and trailing periods. P/E includes unusual tax effects at YUM and uses continuing operations at QSR. EV includes finance leases and excludes operating leases; MCD uses a disclosed lease proxy. Latest disclosed share counts lag the price date, and QSR includes exchangeable partnership units as equity. The accompanying model documents each denominator. MCD has lower reported EV/EBIT but higher reported P/E, illustrating why a normalized peer ranking requires more work, especially following portfolio changes at YUM.

Dividends and buybacks

The quarterly dividend of $1.93 annualizes to $7.72, yielding 3.11% at the reference price. Recent cash generation covers that rate, but the cushion is not unlimited. TTM dividends consumed about 67% of FCF; the new run-rate cost, holding the model share count constant, would consume about 71%. [dividend; 2025; q2_2026]

The 2025 cash dividend plus buybacks almost exhausted FCF before other investing needs. A sustained decline in cash generation would therefore likely put discretionary repurchases under pressure before it could be absorbed indefinitely through borrowing. The dividend record is valuable evidence of a policy preference, not a contractual guarantee of future increases.

Key risks

The main operating risks are continued traffic weakness, pressure on lower-income customers, franchisee profitability, competition and NEXT execution. Food safety, cybersecurity, regulation, geopolitical reactions and currency changes can produce additional shocks. Debt refinancing and a higher discount rate can reduce the value of otherwise stable cash flows.

The strongest bear argument is that future gains require more investment and operator support than shareholders expect. McDonald’s could remain a successful restaurant system while delivering only modest growth in distributable cash per share.

Investment thesis and conclusion

McDonald’s remains an attractive business to study for long-term dividend growth. Its brand, locations and franchising system provide resilience that many restaurant competitors lack. The evidence does not support treating that resilience as immunity from competition, reinvestment needs or valuation risk.

At the reference price, the shares sit above our illustrative base value and require stronger growth, profitability or a lower required return. The constructive case improves if traffic recovers and productivity gains become cash. It weakens if rent support and capex keep rising while customer visits stagnate. This is a conditional assessment, not a personalized buy or sell instruction.

Sources, methodology and publication conditions

Read the accompanying full report, source register, model and verification report together. Historical inputs come from examined company SEC filings; management strategy and dividend claims come from official releases. Calculations are separate from reported figures and analyst assumptions.

Limitations at publication (28 October 2026): Lease/dilution and affiliate cash-flow treatment, post-transaction peer valuation normalization, and the 2025 FCF narrative discrepancy have not been fully reconciled. Market prices and company disclosures after the research cutoff have not been incorporated; the $248.46 reference price is dated 23 October 2026. Readers should not treat scenario outputs as independently verified price targets. Images are AI-generated illustrative artwork, not photographs of actual facilities or financial charts. The original research does not establish the publisher's holdings or potential conflicts; those must be disclosed separately where applicable. AI-assisted research is not an external assurance opinion.

• [2025] https://www.sec.gov/Archives/edgar/data/63908/000006390826000035/mcd-20251231.htm
• [2022] https://www.sec.gov/Archives/edgar/data/63908/000006390823000012/mcd-20221231.htm
• [2020] https://www.sec.gov/Archives/edgar/data/63908/000006390821000013/mcd-20201231.htm
• [2017] https://www.sec.gov/Archives/edgar/data/63908/000006390818000010/mcd-12312017x10k.htm
• [q2_2026] https://www.sec.gov/Archives/edgar/data/63908/000006390826000073/mcd-20260630.htm
• [proxy2026] https://www.sec.gov/Archives/edgar/data/63908/000119312526145548/mcd-20260407.htm
• [next] https://corporate.mcdonalds.com/corpmcd/our-stories/article/NEXT-growth-strategy-advances.html
• [financial_index] https://corporate.mcdonalds.com/corpmcd/investors/financial-information.html
• [2019] https://www.sec.gov/Archives/edgar/data/63908/000006390820000022/mcd-12312019x10k.htm
• [2023] https://www.sec.gov/Archives/edgar/data/63908/000006390824000072/mcd-20231231.htm
• [dividend] https://corporate.mcdonalds.com/content/dam/sites/corp/nfl/pdf/MCD%20-%20Q4%2726%20Dividend%20Release.pdf
• [treasury] https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?field_tdr_date_value=2026&field_tdr_date_value_month=202610&type=daily_treasury_yield_curve
• [price_crosscheck] https://ycharts.com/companies/MCD/price
• [rbi] https://www.rbi.com/English/news/news-details/2026/Restaurant-Brands-International-Inc--Reports-Second-Quarter-2026-Results/default.aspx
• [yum] https://s2.q4cdn.com/890585342/files/doc_financials/2026/q2/Yum-Brands-Q2-26-Earnings-Release.pdf
• [prices] https://stockanalysis.com/stocks/mcd/history/ (web retrieval; direct download returned HTTP 403).