AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 5/6 · 18/10/2026
Moat56
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 3/4 · Established billion-dollar product brands, Systemwide sales and a franchise structure supported by property control and minimum rent demonstrate a current commercial advantage. Comparative brand premiums and cost superiority are not established.
durability · 2/4 · Existing property commitments, franchisee investment and standardized operations support persistence. Contract lengths, renewal histories and long-run competitive share are missing, while competition remains broad.
customer dependency · 2/4 · Franchisees depend on the branded operating system and invest in restaurant assets. Consumer dependence is weaker: repeat engagement is supported by management's loyalty claim and indirect sales evidence, without measured switching friction or retention.
erosion resilience · 2/4 · Expansion and continued revenue and operating-income growth show resilience. Below-target 2025 performance, historical supply-chain impacts and dependence on franchisee cooperation temper the result; generic future risks are not treated as realized losses.
Pricing power50
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 1/4 · The supplied proxy commentary describes higher menu prices alongside weaker perceived value and a narrower price gap with fast-casual alternatives, suggesting fragile pricing acceptance. Attribution and quantified price-versus-volume results are missing, so this low grade rests on qualified narrative evidence rather than measured elasticity.
retention · 2/4 · Management reports increased loyalty-app visit frequency, and Systemwide sales and franchised revenue provide indirect evidence of continuing demand. No retention rate is inferred; expansion and pricing can also drive growth, and contrary proxy commentary alleges lost visits.
margin resilience · 3/4 · First-half 2026 operating margin increased to 46.2% from 45.9%, with operating-income growth also positive in constant currencies. This demonstrates recent corporate profit resilience, but franchise ownership mix affects margins and does not prove menu-price pass-through or franchisee profitability.
contractual freedom · 2/4 · Conventional franchise contracts provide percentage-of-sales royalties and specified minimum rents. Franchisees retain menu-pricing decisions, and the passages do not establish unilateral freedom for the Company to reset existing royalty or rent terms.
Predictability94
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 75.00
- Revenue growth volatility (pp)
- 3.82
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 2.35
Financial strength36
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 31.79
- netDebtEbitGrade
- 34.28
- interestCoverageGrade
- 62.13
- currentRatioGrade
- 16.37
- Debt / FCF (x)
- 5.77
- Net debt / operating income (x)
- 3.29
- Interest coverage (x)
- 7.83
- Current ratio (x)
- 0.95
Capital allocation—
Missing required inputs: dilution. Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 37.21
- 3-year average SBC / revenue (%)
- 0.65
- cashConversionGrade
- 83.60
Management63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · First-half operating cash flow of $5.222 billion funded $1.516 billion of capital expenditure, while disclosed three-year average ROIC was 22.4%. Dividends and repurchases totaled $3.891 billion, exceeding operating cash flow less capital expenditure; substantial debt and lease obligations temper the evidence of discipline. The supplied ROIC methodology is incomplete.
incentive alignment · 3/4 · Actual below-target short-term payouts and early-2026 vested performance-award payouts demonstrate that compensation varied with results. Ownership requirements and hedging restrictions reinforce alignment. Aggregate insider ownership is below 1%, and incentive adjustments exclude restructuring costs, limiting an exceptional assessment.
execution · 2/4 · Restaurant openings, Systemwide sales growth and first-half 2026 income and cash generation demonstrate delivery through indirect operating evidence. However, 2025 operating income and Systemwide sales missed incentive targets, three-year EPS growth missed target, and future platform benefits remain unproven.
governance · 3/4 · Disclosed independent oversight, annual elections, majority voting, proxy access and special-meeting rights provide strong governance structures. The auditor's effective-controls opinion supports financial oversight. The combined Chairman and CEO role limits separation of authority; these disclosures establish practices, not exceptional governance outcomes.
Evidence
•Commit to the Core menu by tapping into customer demand for the familiar and focusing on serving our iconic products that are beloved by customers around the world such as our World Famous Fries, Big Mac, Quarter Pounder and Chicken McNuggets, which are some of our seventeen unique billion-dollar brands.
Strategic Direction / Core menu and seventeen billion-dollar brands · Filed 24/02/2026
•Systemwide sales increased 7% (5% in constant currencies) to $139.4 billion.
2025 Financial Performance / Systemwide sales · Filed 24/02/2026
The business relationship between the Company and its independent franchisees is supported by adhering to standards and policies, including McDonald's Global Brand Standards, and is of fundamental importance to overall performance and to protecting the McDonald’s brand.
Business summary / Franchise brand standards · Filed 07/08/2026
One of the strengths of the franchising model is that the expertise from Company-owned and operated restaurants allows McDonald's to improve the operations and success of all restaurants, and allows innovations from franchisees to be tested and, when viable, efficiently implemented across relevant restaurants.
Business summary / Operating expertise and innovation sharing · Filed 07/08/2026
Conventional Franchise Under a conventional franchise arrangement, the Company generally owns or secures a long-term lease on the land and building for the restaurant location and the franchisee pays for equipment, signs, seating and décor.
Conventional Franchise / Property control and franchisee investment · Filed 07/08/2026
Conventional franchisees contribute to the Company's revenue, primarily through the payment of rent and royalties based upon a percent of sales, with specified minimum rent payments, along with initial fees paid upon the opening of a new restaurant or grant of a new franchise.
Conventional Franchise / Rent, royalties and minimum rent payments · Filed 07/08/2026
McDonald's Corporation 2025 Annual Report 19 RESTAURANT DEVELOPMENT AND CAPITAL EXPENDITURES In 2025, the Company opened 2,276 restaurants and closed 396 restaurants.
Restaurant Development and Capital Expenditures / Openings and closures · Filed 24/02/2026
3 Table of Contents CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) Quarters Ended Six Months Ended June 30, June 30, In millions, except per share data 2026 2025 2026 2025 Revenues Revenues from franchised restaurants $ 4,393 $ 4,213 $ 8,399 $ 7,874 Sales by Company-owned and operated restaurants 2,525 2,458 4,842 4,590 Other revenues 182 172 375 334 Total revenues 7,099 6,843 13,616 12,799 Operating costs and expenses Franchised restaurants-occupancy expenses 680 654 1,356 1,274 Company-owned and operated restaurant expenses 2,138 2,078 4,170 3,937 Other restaurant expenses 163 149 329 289 Selling, general & administrative expenses Depreciation and amortization 111 106 222 213 Other 706 595 1,354 1,170 Other operating (income) expense, net (37) 29 (106) 36 Total operating costs and expenses 3,760 3,611 7,324 6,918 Operating income 3,338 3,232 6,292 5,880 Interest expense 409 390 809 766 Nonoperating (income) expense, net (6) (18) 5 (76) Income before provision for income taxes 2,936 2,861 5,478 5,190 Provision for income taxes 574 608 1,133 1,069 Net income $ 2,362 $ 2,253 $ 4,345 $ 4,121 Earnings per common share-basic $ 3.33 $ 3.15 $ 6.12 $ 5.77 Earnings per common share-diluted $ 3.32 $ 3.14 $ 6.10 $ 5.74 Dividends declared per common share $ 1.86 $ 1.77 $ 3.72 $ 3.54 Weighted-average shares outstanding-basic 709.1 714.5 709.9 714.7 Weighted-average shares outstanding-diluted 711.1 717.6 712.3 717.9 See Notes to Condensed Consolidated Financial Statements.
Condensed Consolidated Statement of Income / First-half 2026 results · Filed 07/08/2026
We also face sustained, intense competition from traditional, fast casual and other competitors, which may include many non-traditional market participants such as convenience stores, grocery stores, coffee shops and online retailers.
Risk factors / Traditional and non-traditional competition · Filed 07/08/2026
We compete primarily on the basis of product choice, quality, affordability, service and location.
Risk factors / Bases of competition · Filed 07/08/2026
Our success as a heavily franchised business relies to a large degree on the financial success and cooperation of our franchisees, including our developmental licensees and affiliates.
Risk factors / Dependence on franchisee success and cooperation · Filed 07/08/2026
Many customers feel that prices have risen while portions have shrunk, making fast food feel like a "bad deal."
Proxy proposal discussion preceding Board opposition / Customer price and portion concerns · Filed 07/04/2026
Inflation remains a significant headwind, as higher menu prices have narrowed the gap between fast food and fast-casual dining options, increasing competition.
Proxy proposal discussion preceding Board opposition / Higher menu prices and competitive positioning · Filed 07/04/2026
The E.coli outbreak from the Quarter Pounder, which led to a temporary menu removal and a decline in visits, continues to have a lingering negative impact on sales.
Proxy proposal discussion preceding Board opposition / Food-safety event and asserted visit impact · Filed 07/04/2026
And through our McDonald’s loyalty app, we drove increased visit frequency – putting us well on our way to our goal of 250 million users by the end of 2027 and opening the door to new, more personalized ways to engage with our fans.
Chairman and CEO letter / Loyalty-app visit-frequency claim and future user goal · Filed 07/04/2026
Franchising enables an individual to be their own employer and maintain control over all employment related matters, marketing and pricing decisions, while also benefiting from the strength of McDonald's global brand, operating system and financial resources.
Business summary / Franchisee marketing and pricing autonomy · Filed 07/08/2026
$ 2,953 $ 2,829 4 % 4 % International Operated Markets 3,230 2,924 10 4 International Developmental Licensed Markets & Corporate 109 127 (14) (33) Total $ 6,292 $ 5,880 7 % 4 % Operating margin 46.2 % 45.9 % •Operating income increased $106 million, or 3% (2% in constant currencies), for the quarter and $411 million, or 7% (4% in constant currencies), for the six months.
Operating Income / First-half operating results and operating margin · Filed 07/08/2026
5 Table of Contents CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) Quarters Ended Six Months Ended June 30, June 30, In millions 2026 2025 2026 2025 Operating activities Net income $ 2,362 $ 2,253 $ 4,345 $ 4,121 Adjustments to reconcile to cash provided by operations Charges and credits: Depreciation and amortization 565 544 1,131 1,064 Deferred income taxes (58) (41) 5 (84) Share-based compensation 39 44 99 89 Other (51) (71) (143) (144) Changes in working capital items (50) (731) (215) (620) Cash provided by operations 2,807 1,998 5,222 4,426 Investing activities Capital expenditures (831) (744) (1,516) (1,295) Purchases of restaurant businesses (74) (56) (153) (131) Sales of restaurant businesses 137 34 209 83 Sales of property 21 11 56 16 Other (121) (114) (244) (314) Cash used for investing activities (868) (869) (1,648) (1,641) Financing activities Net short-term borrowings (repayments) 492 597 (299) (195) Long-term financing issuances — 1,403 1,159 2,901 Long-term financing repayments (580) (700) (581) (1,393) Treasury stock purchases (856) (505) (1,251) (982) Common stock dividends (1,317) (1,265) (2,640) (2,530) Proceeds from stock option exercises 14 41 142 188 Other (140) (126) (142) (87) Cash used for financing activities (2,387) (555) (3,612) (2,098) Effect of exchange rates on cash and cash equivalents 99 65 85 104 Cash and equivalents increase (decrease) (348) 638 48 791 Cash and equivalents at beginning of period 1,170 1,238 774 1,085 Cash and equivalents at end of period $ 822 $ 1,876 $ 822 $ 1,876 See Notes to Condensed Consolidated Financial Statements.
Condensed Consolidated Statement of Cash Flows / Capital expenditure, distributions and financing · Filed 07/08/2026
Financial Statements CONDENSED CONSOLIDATED BALANCE SHEET (unaudited) In millions, except per share data June 30, 2026 December 31, 2025 Assets Current assets Cash and equivalents $ 822 $ 774 Accounts and notes receivable 2,485 2,466 Inventories, at cost, not in excess of market 58 61 Prepaid expenses and other current assets 980 863 Total current assets 4,345 4,163 Other assets Investments in affiliates 2,896 2,820 Goodwill 3,347 3,354 Miscellaneous 6,393 6,331 Total other assets 12,637 12,505 Lease right-of-use asset, net 14,459 14,606 Property and equipment Property and equipment, at cost 49,943 49,290 Accumulated depreciation and amortization (21,464) (21,049) Net property and equipment 28,479 28,241 Total assets $ 59,920 $ 59,515 Liabilities and shareholders’ equity (deficit) Current liabilities Accounts payable $ 1,114 $ 1,149 Lease liability 690 694 Income taxes 327 250 Other taxes 261 247 Accrued interest 428 533 Accrued payroll and other liabilities 1,198 1,488 Total current liabilities 4,018 4,361 Long-term debt 39,863 39,973 Long-term lease liability 14,039 14,147 Long-term income taxes 176 139 Deferred revenues - initial franchise fees 946 945 Other long-term liabilities 677 704 Deferred income taxes 1,222 1,038 Shareholders’ equity (deficit) Preferred stock, no par value; authorized – 165.0 million shares; issued – none — — Common stock, $0.01 par value; authorized – 3.5 billion shares; issued – 1,660.6 million shares 17 17 Additional paid-in capital 9,841 9,641 Retained earnings 71,987 70,282 Accumulated other comprehensive income (loss) (2,340) (2,414) Common stock in treasury, at cost; 953.0 and 950.0 million shares (80,527) (79,316) Total shareholders’ equity (deficit) (1,023) (1,791) Total liabilities and shareholders’ equity (deficit) $ 59,920 $ 59,515 See Notes to Condensed Consolidated Financial Statements.
Condensed Consolidated Balance Sheet / Cash, debt and lease liabilities · Filed 07/08/2026
Targets Threshold Target Maximum Actual Three-Year Compound Annual EPS growth (Weighting 75%) 0.0% 9.0% 13.0% 6.0% Three-Year Average of Annualized ROIC (Weighting 25%) 16.0% 20.0% 24.0% 22.4% Stock Options The remaining 50% of the target annual long-term incentive award values for our NEOs were granted in the form of options.
Executive compensation / Realized three-year EPS growth and ROIC · Filed 07/04/2026
Commitment to Our Pay-for-Performance Philosophy The Company’s 2025 operating income and Systemwide sales results were below target, resulting in a Corporate STIP payout factor for NEOs of 76.4%.
Pay-for-performance discussion / Below-target results and actual STIP payout factor · Filed 07/04/2026
Related to the PRSUs awarded to our executives that vested in early 2026, ROIC performance finished above target, while annual EPS growth and relative TSR finished below target and below median, respectively, resulting in a 82.2% payout factor.
Pay-for-performance discussion / Awards vested in early 2026 and actual payout factor · Filed 07/04/2026
In addition, our Stock Ownership and Retention Policy imposes requirements on senior officers, as discussed under “Policy Regarding Management’s Stock Ownership” on page 63.
Ownership policies / Senior-officer stock ownership and retention requirements · Filed 07/04/2026
Directors and officers are prohibited from entering into hedging or pledging arrangements with respect to our common stock.
Ownership policies / Director and officer hedging and pledging prohibition · Filed 07/04/2026
Directors and executive officers as a group owned (directly, indirectly and through benefit plans) less than 1% of our common stock.
Security Ownership of Management / Aggregate ownership · Filed 07/04/2026
2026 Proxy Statement 7 BOARD & GOVERNANCE PRACTICES Our Board’s commitment to strong corporate governance is highlighted by the following practices: § All Director nominees except the CEO are independent § All standing Committees are independent (except Executive Committee, chaired by our CEO) § Regular executive sessions of independent Directors § Annual election of all Directors § Majority voting standard for uncontested Director elections § Ongoing Board assessment and refreshment led by our Governance Committee § Tenure limitation for non-management directors § Regular succession planning at the CEO and executive management levels and effective leadership transitions, as appropriate § No supermajority voting provisions § No “poison pill” (shareholder rights plan) § Board access to independent advisors § Meaningful limitations on Directors’ service on other boards § Proxy access for Director candidates nominated by shareholders reflecting standard market practices § Annual Board self-evaluation § Ability for shareholders to call special meetings § Robust Director stock ownership requirements § No Director hedging/pledging of Company stock § Public disclosure of corporate political contributions and certain trade association memberships § Significant shareholder outreach and engagement program Governance Highlights Shareholder Engagement We understand the importance of engaging with our shareholders and are committed to regularly discussing their perspectives on significant issues.
Board and Governance Practices / Independence and shareholder rights · Filed 07/04/2026
The Board affirmed that Mr. Kempczinski remains best suited to serve as the Board’s Chairman in light of the Board’s current structure, where all but one Director is independent; all of the committees (except the Executive) are comprised of independent Directors; and the Board has robust independent oversight.
Board leadership / Combined Chairman and CEO role and independent oversight · Filed 07/04/2026
In our opinion, McDonald’s Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria.
Independent auditor report / Effective internal control over financial reporting · Filed 24/02/2026
and Canada may call toll-free: (877) 717-3926 Shareholders from other countries: (412) 232-3651 Banks and Brokers may call collect: (212) 750-5833 © 2026 McDonald’s 96 2026 Proxy Statement Appendix A Adjustments to Reported Results For purposes of the 2025 incentive programs, operating income and EPS results have been adjusted to exclude foreign currency translation (either positive or negative) and restructuring costs incurred in connection with the continued organizational transformational efforts in support of the Accelerating the Arches growth strategy.
Appendix A / Incentive-performance adjustments · Filed 07/04/2026
•Free cash flow was $7.2 billion, an 8% increase from the prior year.
2025 Financial Performance / Free cash flow and stated increase · Filed 24/02/2026
Free cash flow was $7.2 billion in 2025, a decrease of $510 million or 8%.
Cash Flows / Free cash flow and conflicting stated decrease · Filed 24/02/2026
Supply chain interruptions and related price increases have in the past and may in the future adversely affect us as well as our suppliers and franchisees, whose performance may have a significant impact on our results.
Risk factors / Historical supply-chain interruption and price impacts · Filed 07/08/2026
As part of these investments, we are continuing to place emphasis on improving our service model and strengthening relationships with customers, in part through digital channels and loyalty initiatives, mobile ordering and payment systems, and enhancing our drive thru technologies, which efforts may not generate expected results.
Risk factors / Digital and loyalty investment and uncertain returns · Filed 07/08/2026
The contributions to operating margin differ by segment due to each segment's ownership structure, primarily due to the relative percentage of franchised versus Company-owned and operated restaurants.
Operating margin discussion / Effect of restaurant ownership structure · Filed 24/02/2026
