McDonald’s (NYSE:MCD) handed investors a turnaround plan last month, and investors handed back a lower share price. At its investor day in Chicago, the company committed roughly $8.5 billion in support for its franchisees through 2036. CNBC reported that the stock fell as the spending plan came into view, capping a rough stretch for fast food’s longtime safe bet.
The business underneath is simpler than the mood around it. McDonald’s owns the brand and much of the real estate beneath its restaurants. Independent franchisees run most of the kitchens and pay the company rent and royalties. Think of it as a landlord with a menu, where high-margin items like soft drinks and McCafé offerings drive significant ticket profitability, drawing comparison to pure-play liquid refreshment leaders in the 10 Best Beverage Stocks to Buy According to Analysts. The real question isn’t whether people still want fries. It’s whether writing big checks to franchisees fixes a sluggish US business, or simply drains the cash that made this stock an income favorite.
A Landlord With Data
The moat starts with scale, but it’s increasingly about data. Across 70 loyalty markets, sales to loyalty members over the trailing 12 months climbed more than 20% to $40 billion. Active loyalty users (those engaging within 90 days) rose 13% to nearly 220 million as of the second quarter of 2026. Few rivals have that kind of direct line to customers.
The franchise model turns that reach into steady profit. In Q2, systemwide sales (sales across every restaurant, franchised or not) hit $37 billion, up 5%. Adjusted earnings per share, which strip out restructuring charges, rose 6% to $3.38. Modest sales gains becoming dependable earnings growth is the hallmark of the asset-light setup shared by other franchise-heavy restaurant chains.
Where the Engine Sputters
The soft spot is comparable sales, the measure of growth at restaurants open at least a year. Global comps rose 1.3% in Q2, down from 3.8% a year earlier. The US, the company’s biggest market, managed just 0.8%, against 2.5% the year before. CEO Chris Kempczinski stressed that every segment stayed positive, but acknowledged room to raise the bar at home. The company also named Skye Anderson president of McDonald’s USA.
Investor day was the bigger answer. Under its McDonald’s NEXT strategy, the company plans about $8.5 billion in rent relief and capital support through 2036, with roughly $5 billion of it landing by 2030. Management says the efficiency gains are worth about $100,000 in annual cash flow for the average US restaurant, with an estimated four-year payback for franchisees. It’s also targeting 1.5 percentage points of share gains in both chicken and beverages by 2030, a push into turf where fast-growing chains have been winning customers.
Who’s Footing the Bill?
Investors’ worry is the spending itself. From 2027 through 2030, McDonald’s expects about $3 billion in annual baseline capital expenditures, plus $1.5 billion to $2 billion in cumulative capital support for franchisees. Money steered toward remodels and rent relief isn’t going to shareholders, at least for now. And the payoff is years out, while comps are slowing today.
Management’s counterargument is that healthier franchisees mean more sales and more rent down the line. The company is targeting an operating margin in the low-to-mid 50% range and free cash flow conversion in the mid-to-high 80% range by 2030. Those are promises, though, not results. Until US traffic turns, this objection stays live.
A Rare Markdown
The selling has left McDonald’s at 18.25 times forward earnings, as of October 12, well below its 5-year average of 24.50. In plain terms, investors now pay a little over $18 for each dollar of expected profit. It isn’t bargain-bin cheap. The restaurant sector trades at 14.78 times forward earnings, so McDonald’s still carries a premium. And with earnings expected to grow 6.82% in 2027, a multiple of 18.25 looks fair rather than steep. The question is whether the old premium was the norm or the exception.
One detail suggests management isn’t worried about the cash. The board raised the quarterly dividend 4% to $1.93 last month, or $7.72 a year, marking the 50th straight year of increases. That streak places it alongside the exclusive club of 10 Best Dividend Kings To Buy According to Hedge Funds. Lifting the payout in the same month as a multibillion-dollar franchisee pledge signals real confidence in cash flow. Hedge funds have trimmed their exposure, with 79 holding the stock in the most recent quarter, down from 83 in the prior one. Short interest sits at 2.17% of the float, pointing to fairly limited bearish positioning.
The Turnaround Test
The evidence points to a business that is still profitable and still growing, priced well below its own history, with a US traffic problem it’s now paying to fix. That setup suits patient income investors who can live with a multi-year rebuild and a dividend that keeps climbing. What would change the picture is US comparable sales. A pickup as the franchisee support rolls out would make today’s multiple look like a gift. Another stretch of near-flat US comps while spending ramps up would suggest 18.25 times earnings is the new normal, not a discount.
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