McDonald's does not primarily make money by cooking hamburgers. It makes money by acting as a landlord and brand licensor to the people who do the cooking. About 95% of its 45,356 restaurants worldwide are run by independent business owners called franchisees. Those franchisees pay McDonald's rent and royalties based on a percentage of every sale they make. McDonald's owns or leases the land and building, then sublets the location to the franchisee. This structure means McDonald's collects a cut of $129.7 billion in total franchisee sales each year without bearing most of the day-to-day costs of running a restaurant. The diagram below traces where the money goes.
How McDonald's Makes Money
flowchart TD
A["45,356 Restaurants<br/>95% Franchised"] --> B["Franchisee Sales<br/>139.4B Systemwide"]
B --> C["Rent & Royalties<br/>From Franchisees"]
C --> D["Company Revenues<br/>26.9B Total"]
A --> E["Company-Owned<br/>Restaurant Sales"]
E --> D
D --> F["Operating Income<br/>12.4B at 46.1%"]
F --> G["Free Cash Flow<br/>7.2B"]
G --> H["Reinvest in Growth<br/>3.4B CapEx"]
H --> I["New Restaurants<br/>~2,300 Opened"]
I --> A
G --> J["Shareholder Returns<br/>7.1B Dividends<br/>& Buybacks"]
B --> K["Digital & Loyalty<br/>70 Markets"]
K --> L["Delivery Sales<br/>41K Restaurants"]
L --> B
H --> K
Five years of financial data tell a consistent story. Operating cash flow has grown from $9.1 billion in 2021 to $10.6 billion in 2025. Free cash flow, the money left after paying for new restaurants and equipment, has stayed in a tight band between $5.5 billion and $7.3 billion across those five years. That consistency is the point. The franchised model is designed to produce steady, predictable cash no matter what happens to food costs or wages at any individual restaurant.
Operating Cash Flow (2021 to 2025, $B)
Operating cash flow dipped in 2022 then recovered strongly. The five-year trend points upward.
Revenue growth at the company level has been modest in the XBRL data, but that number understates the actual scale of the business. The more telling figure is systemwide sales, which counts every dollar spent at every McDonald's restaurant whether the company owns it or not. In 2025, systemwide sales reached $139.4 billion, up 7% from the year before. Total revenues reported by the company itself reached $26.9 billion in 2025, because the company only books its share of franchisee sales as fees, not the full sale amount. Operating margin expanded from 45.2% in 2024 to 46.1% in 2025, meaning the company kept more of each revenue dollar as profit.
$139.4B
Total systemwide sales across all McDonald's restaurants in 2025
One number that deserves attention is net debt, which has climbed steadily from $30.9 billion in 2021 to $39.2 billion in 2025. McDonald's deliberately carries a large amount of debt because its cash flows are predictable enough to service it. But rising interest expense is a real cost. Interest expense grew 5% in 2025 and 11% in 2024, and the company expects it to increase a further 4% to 6% in 2026. More debt at higher interest rates means more of each cash dollar goes to lenders before it reaches anything else.
Net debt has grown by $8.3 billion over four years as McDonald's funds expansion and returns cash to shareholders.
The growth strategy right now is called Accelerating the Arches. It has three main bets running at once. First, keep opening restaurants fast. Nearly 2,300 new locations opened in 2025, and the company is targeting 50,000 total restaurants by the end of 2027. Second, build a loyalty program big enough to change customer behavior. McDonald's has loyalty programs in 70 markets and wants 250 million active users by end of 2027. Third, push delivery through its own mobile app rather than relying entirely on outside platforms, with a goal of 30% of delivery sales coming through the McDonald's app by end of 2027.
What is a Loyalty Program Worth?
A loyalty program tracks what individual customers order and how often they visit. This lets a company send personalized deals to bring people back more frequently. McDonald's targets $45 billion in annual systemwide sales to loyalty members by end of 2027. Loyal customers who visit more often are worth more than occasional visitors, even if the discount given to attract them costs money upfront.
The risk picture has several serious layers. The first is the franchisee relationship itself. McDonald's revenue depends almost entirely on franchisees staying financially healthy and following brand standards. If franchisee sales drop or franchisees cannot access loans to reinvest in their restaurants, McDonald's rent and royalty income falls directly. The company has limited tools to force franchisees to comply with standards without damaging those relationships.
The second risk is the supply chain. Key ingredients like beef and chicken come from a concentrated set of suppliers. A disruption from weather, disease, war, or tariffs can cut off supplies or make them sharply more expensive for both the company and its franchisees. The third is legal classification. Courts in several countries are actively examining whether workers in franchised restaurant systems should be treated as employees of the parent company rather than employees of the franchisee. A ruling that McDonald's is a joint employer of the more than two million people working in its franchised restaurants would fundamentally change the cost structure of the entire business.
2020
crisis
Pandemic Forces a Permanent Pivot to Digital
When dining rooms closed during the COVID-19 pandemic, McDonald's shifted customers to drive-through, curbside pickup, and delivery. That forced acceleration of digital ordering tools and delivery partnerships that the company has since built its entire growth strategy around. The loyalty program, the mobile app, and the delivery infrastructure that McDonald's is now targeting billions of dollars toward all trace their urgency back to 2020.
Technology adds another layer of risk that did not exist five years ago. McDonald's relies on computer systems for ordering, payments, delivery coordination, and franchisee management. A cyberattack or data breach could shut down restaurant operations or expose customer payment information. The company is also adding artificial intelligence tools across its operations, which introduces the risk of unexpected failures or violations of new data protection laws such as the EU AI Act. Real estate is a quieter risk. McDonald's owns or holds long-term leases on most restaurant locations. Once committed, those locations cannot be moved quickly if neighborhoods change or if more customers shift permanently to delivery rather than visiting physical restaurants.
46.1%
Operating margin in 2025, up from 45.2% in 2024, showing the franchised model converting revenue efficiently
McDonald's returned $7.1 billion to shareholders through dividends and share repurchases in 2025 alone. The quarterly dividend was raised 5% to $1.86 per share. That level of cash return is only possible because the franchised model requires relatively little capital compared to the cash it generates.
The Bet
McDonald's digital push has to change how often its most loyal customers show up. The company is spending heavily to build a loyalty program targeting 250 million active users and $45 billion in annual sales to loyalty members by end of 2027. If digital engagement simply replaces existing visits rather than adding new ones, the investment grows costs without growing revenue. The entire expansion logic of Accelerating the Arches, including the push to 50,000 restaurants and the debt load that finances it, assumes digital tools will drive meaningfully higher visit frequency and spending per customer at scale.
Open question
McDonald's has a machine that converts franchisee sales into steady cash with remarkable consistency. Net debt has grown by $8.3 billion in four years to fund faster expansion and shareholder returns, while interest expense keeps rising. The company is racing to reach 50,000 restaurants and 250 million loyalty app users by end of 2027. Can a fast-food brand, operating in a mature market where most people already know what McDonald's is, use a digital loyalty program to meaningfully grow how often customers visit rather than simply digitizing the visits they were already going to make?
Compiled · 10-K · FY2025
Franchise Business Model Risk
McDonald's makes most of its money from franchisees paying rent and royalties. If franchisees cannot get loans or their sales drop, McDonald's revenue drops directly. The company also relies on franchisees to follow brand standards, but has limited ability to control or discipline them, which could damage the McDonald's brand.
Supply Chain Disruptions
Some ingredients like beef and chicken come from only a few suppliers. Wars, weather, tariffs, or other disruptions can cut off supplies or make them much more expensive. This directly hurts both the company's restaurants and franchisees' ability to operate profitably.
Real Estate Portfolio Limitations
McDonald's owns or leases land and buildings for most restaurants for long periods. Once a location is chosen, the company cannot quickly move if neighborhoods change or customer preferences shift to delivery instead of drive-thru locations. Bad location decisions can directly reduce sales.
Technology and Data Security Breaches
McDonald's relies on computer systems for ordering, payments, delivery, and managing franchisees. Hackers could steal customer payment information or shut down restaurants' operations. The company is also adding artificial intelligence tools that could cause unexpected problems or violate new data protection laws like the EU AI Act.
Litigation Over Franchise and Employment Classification
Lawsuits could force courts to decide that franchisees are actually employees rather than independent businesses. If that happens, McDonald's could owe wages, benefits, and taxes for thousands of restaurant workers, which would fundamentally change how the business makes money.
10-K Item 1A · Risk Factors
