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McDonald’s is one of the largest global fast-food companies with 43,000 restaurants in more than 100 countries. The chain was founded in 1940 by Maurice and Richard McDonald as a drive-thru concept before the siblings reenvisioned the restaurant as a low-cost food option later that decade. In 1954 Ray Kroc discovered the business and in 1955 launched McDonald’s System Inc., later known as the McDonald’s Corp., before buying the business in 1961. McDonald’s launched beverage-focused concept CosMc’s in December 2023, but announced in May 2025 it would close its five remaining locations.

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McDonald's (MCD): Company Profile, Stock Price, News, Rankings

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McDonald's

mcdonald's

Hello, and welcome to McDonald's third quarter 2026 investor conference call. At the request of McDonald's Corporation, this conference is being recorded. Following today's presentation, there will be a question-and-answer session for investors. At that time, investors only may ask a question by pressing star one on their touch-tone phone. I would now like to turn the conference over to Mr. Dexter Congbalay, Vice President of Investor Relations for McDonald's Corporation. Mr. Congbalay, you may begin.

Good morning, everyone, and thank you for joining us. With me on the call today are Chairman and Chief Executive Officer Chris Kempczinski and Chief Financial Officer Ian Borden. As a reminder, the forward-looking statements in our earnings release and 8-K filing also apply to our comments on the call today. Both of those documents are available on our website, as are reconciliations of any non-GAAP financial measures mentioned on today's call, along with their corresponding GAAP measures. Following prepared remarks this morning, we will take your questions. Please limit yourself to one question and then re-enter the queue for any additional questions. Today's conference call is being webcast and is also being recorded for replay via our website. Now, I'll turn it over to Chris.

Thanks, Dexter, and good morning, everyone. During today's call, I'll start with the next steps we're taking to build momentum in the U.S. Ian will then provide details on our performance in the quarter. I'll then wrap up with an update on how we're advancing McDonald's > NEXT across the system. In the third quarter, McDonald's delivered global comparable sales of 1.5% and system sales growth of 4% in constant currency, reflecting the growing contribution from new restaurant openings. Our international markets delivered another quarter of solid results, supported by the continued strong execution across value, menu, and marketing in most of our largest markets, even amidst a continued challenging consumer environment. In the U.S., performance improved as the quarter progressed, with comparable sales turning positive in September, following a slightly negative result in July and August.

That improvement followed a series of interventions we initiated during the quarter, restoring some digital offers to drive frequency with our most engaged customers, shifting marketing support toward proven value platforms, and stepping up our focus on restaurant-level execution. We're encouraged by the initial response to those interventions and the direction of the business. At the same time, we know there's more work to do. Our focus now is to build on that improvement and accelerate baseline performance. Specifically, that includes three additional interventions in the months ahead. First, and most importantly, nailing the final piece of our value equation, entry-level offerings. Second, engaging our most frequent customers by stepping up compelling digital offers that give them more reasons to visit. Third, reinforcing taste and quality credentials are our biggest equities, including system training on taste, quality, and great hospitality.

We know there's particular interest in our U.S. value plan, so allow me to elaborate on the specific steps that we are taking and their expected timing. Just last week, we began an eight-week test of two new everyday affordable price menu constructs across all day parts in about 1,900 restaurants across a handful of regions. We're testing mix-and-match bundles that give customers greater choice and provide familiar ordering behaviors for prior buy one, add one offers. We're also testing fixed bundles that give customers a set combination at an attractive price and make ordering straightforward. At the same time, franchisees representing about an additional 4,000 restaurants have chosen to move forward with similar entry-level bundles in advance of the formal test results. Together, these restaurants and those participating in the formal test represent more than 40% of the U.S. system, reflecting strong alignment around the opportunity.

We'll use the results of this test to determine which structure resonates most with customers, works best operationally, and delivers sustainable incremental traffic and sales for franchisees. Our goal is to launch a new program nationally in early 2027. We've already made significant improvements to address holistic value across our menu, which contributed to improvement in value and experience scores across our top 10 markets. Today, our base menu pricing across the industry's most popular menu items in chicken, beef, and beverages is generally below that of our nearing competitors. Our $5 and $6 meal deals remain industry standouts, and our Extra Value Meals on everyday fan favorites have become a proven platform to drive incremental sales. We provide a compelling broad set of digital offers to more than 45 million loyalty members in the U.S. through the McDonald's app. Our goal is straightforward.

Customers should see a clear and compelling value proposition every time they consider McDonald's, whether looking for an affordable individual item, a complete meal, or a digital offer in the mobile app. In conclusion, we're exactly where we hoped to be when we shared our comments regarding U.S. performance at Investor Day. We're taking the right steps to improve our near-term performance in the U.S., and I'm encouraged by our baseline traffic trends in September and October. At the same time, beverages continues to perform well and are contributing to incremental check growth. With that, I'll hand it over to Ian to take you through the quarter in more detail.

Thanks, Chris, and good morning, everyone. In the third quarter, global comparable sales grew 1.5% in a soft consumer environment, particularly in Europe. In spite of the environment, we continued to gain or hold share across the majority of our top markets. Beginning with the U.S., comparable sales declined 0.2% for the quarter and are up 1.4% on a year-to-date basis. As Chris just highlighted, comp sales improved as the quarter progressed, turning positive in September as a result of steps we took during the quarter to begin to stabilize baseline guest counts. One step was to partially restore a broader range of regional and national digital offers to drive higher frequency of visits from active loyalty members, as well as to generate traffic from new and lapsed loyalty members. Examples of these offers included a $2 breakfast sandwich and free fries with a $1 minimum purchase.

The initial responses to the mass digital offers exceeded expectations for both incremental guest counts and sales, and helped to reverse the decline in baseline trends we saw in Q2 and early in Q3. The second step was reallocating marketing support toward rest-of-day entry-level meal deals and Extra Value Meals, proven and compelling components of our value offerings. Since relaunching EVMs more than a year ago, unit sales from our top EVMs are up about 7% versus the prior year, and we've consistently seen incremental traffic with higher average check and margin. This trend continued late in the quarter behind nationally price-pointed offerings, including a $5 Sausage McMuffin and egg meal and an $8 Big Mac meal. As Chris noted, the U.S. is also testing additional entry-level value offerings, which we expect to launch in early 2027 to complement these strong existing value programs.

Turning to menu, our new specialty beverage platform continued to perform well, delivering clear incrementality in the quarter behind strong take rates and repeat purchases across the assortment. We continued to see checks that included a specialty beverage up about 50% compared to the full-day average check, with the majority of units sold after lunch. The addition of Red Bull Dragonberry Energizer in August delivered a boost to the platform, with minimal cannibalization of Refreshers and crafted sodas. During the six-week advertised launch window, it sold the most units within the platform and lifted total specialty beverage category sales. In short, for the U.S. overall, we're encouraged by the initial response to the interventions we undertook to improve baseline trends and how the U.S. system is acting together to strengthen business momentum as we exit the year.

Turning to the International Operated Markets, comparable sales increased 1.4%, led by Australia and Germany, and we gained or held share in most of our top markets. IOM comparable sales decelerated slightly as compared to the second quarter. This primarily reflected the continued underperformance versus our expectations in France, as well as the impact on restaurant operating hours from the recent escalation of the war in Ukraine. Excluding these two factors, IOM comparable sales would have exceeded our expectation for the quarter, as markets continued to execute our playbook of delivering everyday value, offering relevant menu innovation, and driving strong marketing. Beginning with value, Australia expanded its McSmart platform with new pricing tiers for meal bundles that drove incremental sales and guest counts. Germany and the U.K. strengthened their affordability platforms with a particular focus on families, including price-pointed Happy Meal offers.

Additional value initiatives such as the U.K.'s Chicken McNuggets Extra Value Meal add-on and savers breakfast offers helped drive guest visits and strengthen value perceptions. For menu innovation, the launch of specialty beverages in Australia early in July significantly exceeded expectations, with strong take rates and contribution to sales. Australia delivered many of the business performance and demographic trends we've shared about this platform in other markets. Specialty beverages also continued to deliver strong performance in Canada and Germany. Canada's launch of Red Bull Energizers in the quarter exceeded overall unit sales forecasts and was incremental to other specialty beverage sales. In Germany, the platform featured its first specialty beverage LTO, the Italo Spritz, and continued to drive incremental guest counts, improve baseline momentum, and capture beverage market share in the quarter.

The performance across the U.S., Canada, Germany, and Australia reinforces our confidence that the specialty beverages can become a sustainable global growth platform under McDonald's > NEXT and be a key driver for our goal to capture an additional 1.5 percentage points of beverage market share by 2030. We remain on track to launch specialty beverages across nearly all of our European markets by mid-2027 and across more International Developmental Licensed Markets throughout 2027. Beyond beverages, we continue to see solid momentum in another global growth platform under McDonald's > NEXT, large beef burgers. In Australia, the Quarter Pounder was again the center of innovation and marketing, featuring the Quarter Pounder Deluxe and Double Quarter Pounder Barbecue Bacon, with the performance of both exceeding expectations.

Australia's successful Quarter Pounder innovation has confirmed the opportunity that we believe exists with this equity across other markets, which will be a focus area in 2027. Germany also continued to build on the momentum of the Big Arch platform, featuring the Big Arch with Bacon and Big Tasty Bacon, with performance beating expectations and supporting beef market share gains in the quarter. The U.K. and Spain also featured Big Arch during their quarter, extending positive performance in the beef category to these markets. Turning to marketing, as we highlighted at our Investor Day, Menu Heist is an example of how we are leveraging our global scale to offer customers a curated selection of international menu favorites at their local McDonald's restaurant to create customer excitement, drive guest visits, and keep the McDonald's brand at the center of the experience.

In both Germany and Canada, the campaign generated strong sales and guest count growth. Germany delivered one of its highest sales weeks ever in the market, supported by menu items such as McExtreme Bacon from Spain and McCrispy Chili Honey from Canada. In the U.K., Menu Heist launched at the end of September with early social media trends showing strong customer excitement. While many of our major IOM markets delivered strong execution during the quarter, France continued to perform below our expectations, which Chris will discuss in a few minutes. Turning to the International Developmental Licensed Markets, comparable sales increased 4.2%, with all geographic regions delivering positive comparable sales. Japan led the way, driven by strong execution across value, menu, and marketing, and has now delivered 44 quarters of consecutive comp sales growth.

IDL's comparable sales growth was tempered by results in China, as the near-term macro environment and consumer backdrop remain challenging. At the same time, the China team continued to drive operational efficiency, which supported improved bottom-line performance versus the prior year quarter. Turning to the enterprise P&L, our top-line performance drove adjusted earnings per share of $3.57, including a $0.01 headwind from foreign currency translation. On a constant currency basis, adjusted earnings per share increased 11% compared with the prior year quarter. We currently estimate no impact of foreign currency translation on adjusted earnings per share for the fourth quarter versus the prior year based on current exchange rates. As always, this is directional guidance, as rates will likely change. In the third quarter, we generated nearly $4.2 billion in restaurant margins.

Our year-to-date adjusted operating margin was 48.3%, reflecting higher other operating income, including the benefit from our refranchising efforts, which led to higher gains on sale of restaurants. We are making steady progress towards our goal of having 98% of our global restaurant portfolio franchised by 2028, having refranchised about 175 restaurants across the U.S. and IOM so far this year. SG&A expenses were 2% of systemwide sales in the quarter, and we continue to expect SG&A as a percentage of systemwide sales for the full year to be approximately 2.2%. As we discussed at Investor Day, we expect the investments we have made in global systems, shared capabilities, and high-quality enterprise data will begin contributing to improved efficiency on SG&A as a percentage of systemwide sales in 2027.

Turning to new unit growth, we remain disciplined in our development decisions as we continue to open restaurants only where we expect attractive long-term returns for both McDonald's and franchisees. We now expect 2,500 gross restaurant openings globally this year, slightly below our target of 2,600, but remain on track for approximately 2,100 net restaurant openings. We now expect 2026 capital expenditures of about $3.7 billion, which is at the low end of our previously guided range of $3.7 billion-$3.9 billion, reflecting opening slightly fewer gross new restaurants in owned markets, as well as the impact of foreign currency. In summary, our third quarter results were consistent with the trajectory that we previously outlined for the U.S. business, alongside continued solid performance across most of our international business.

We are encouraged by the improvement in U.S. baseline trends that we saw as the quarter progressed and remain focused on the further work to do to position the business for stronger, more consistent performance in 2027. At the same time, we will continue investing behind McDonald's > NEXT at scale to drive sustainable long-term growth and productivity. With that, let me turn it back over to Chris.

Thanks, Ian. I want to offer a quick word on France. A few weeks ago, our franchisees in France voted in support of a well-defined and holistic path forward, including simplifying the market's governance structure to enable greater flexibility and agility for our business moving forward. This was a historic vote, and I want to thank our franchisees for their partnership to get the business back on track. While we continue to face short-term disruptions to our business in France due to the recent protests, we are now better positioned to drive growth behind stronger marketing support and the right combination of innovation, value, and improved execution. Six weeks ago, we hosted Investor Day here in Chicago to detail McDonald's > NEXT, our new long-term growth strategy.

At its core, McDonald's > NEXT is all about how we improve the customer experience, from the food we serve to the hospitality that we offer, while making our restaurants easier to operate and more efficient. Our ambition is simple: to be the first choice for more customers more often. Across the global system, our franchisees, suppliers, and employees are now stepping up, exchanging ideas, sharing solutions, and providing feedback. That's how we get better, and it demonstrates the power of our unique three-legged stool model. While McDonald's > NEXT is a multi-year strategy, we're already putting elements of it into action. Our internal mantra is, "NEXT is now." In early October, on our Founder's Day, also known as Ray Kroc's birthday, we launched Make It Golden.

Make It Golden is the largest capability-building initiative in our history, focusing on elevating the guest experience by delivering great-tasting food and uniquely McDonald's hospitality. We're giving restaurant teams the training and tools to create more of these moments more consistently and at scale. In the first month, we completed the first round of trainings for our key leaders and experts who are responsible for cascading Make It Golden across more than 18,000 restaurants in the first quarter.

We're also making great progress rolling out our new beverage platform. Today, nearly 18,000 restaurants across the U.S., Germany, Canada, and Australia are driving incrementality by giving customers new reasons to choose McDonald's. We're on track to expand our specialty beverage platform to more than 7,000 additional restaurants across Europe by mid-2027. We've already begun setting up operational pilots for hand-breaded chicken in the U.S. and Ireland, as we work to elevate taste and quality in our fastest-growing category.

In early 2027, we'll launch full advertised sales tests in about 100 restaurants in a couple U.S. cities and a complete full national rollout across Ireland. We're starting to open remodeled NEXT restaurants across the globe, with the first international restaurant opened in Poland a few weeks ago, followed shortly by Spain. As we shared at Investor Day, we've reimagined the design of our restaurants to deliver a more appealing modern customer experience with new kitchen layouts and equipment to support future menu innovation and gold standard execution alongside our new restaurant operating platform, Arch IQ. We're on track to begin remodeling hundreds of U.S. restaurants in 2027 as we ramp up to a global run rate in excess of 5,000 restaurants per year beginning in 2028.

Finally, we're expanding testing of Archy, our smart ordering system, across more drive-throughs in the U.S. and Australia, where it's giving our crew more time to spend with our customers and make sure every order is delicious. We expect Archy to be deployed across a majority of U.S. restaurants by the end of 2027, with further pilots planned internationally through 2027. This is NEXT in action, strengthening how we operate today while building the growth platforms and capabilities that will position McDonald's to lead for the long term. We'll continue to regularly update you on our progress and associated results behind key elements of NEXT throughout 2027. At McDonald's, nothing is real until it's real in the restaurants. As we close out 2026, we're focused on reestablishing momentum on our U.S. business while expanding share gains across our international business.

I'm encouraged by our near-term progress and excited about the upside potential that McDonald's > NEXT will unlock for our business in the years ahead. With that, we'll take your questions.

Thank you. As a reminder, if you are an investor and would like to ask a question, please press star followed by the number one on your telephone keypad. We ask that you limit yourself to one question and requeue for any additional questions.

Our first question today is from Brian Harbour of Morgan Stanley.

Thanks. Good morning, guys. I guess the question is just about franchisee conversations since we were last together. First of all, do you feel like there's alignment in the U.S. on value at this point, and that being kind of the primary mover as we go into early 2027? Then I guess second, on the NEXT strategy, do you feel like they've been very receptive to the elements you laid out in September, kind of the investment required and the timeline, or any updates on your thinking there?

Hey, Brian. First on value, I think there is very strong alignment around focusing on this entry-level value as being the last piece of the value equation for us that we need to figure out. As I made mention in my prepared remarks, I think that is why we already see that we have about 40% of the U.S. system is doing some version of an entry-level value program. Part of that is in testing, part of that is franchisees not wanting to wait for the test and actually get out and put entry-level value in place already. I do think there is really good alignment around getting after the entry-level value in the U.S. As I have talked about before, I think we are in good shape on the other elements of value.

Regarding McDonald's > NEXT, we are having a lot of different conversations with franchisees, but broadly, are franchisees aligned around improving the customer experience, taste, quality, hospitality 100%? Are they aligned around going after making the restaurants easier to operate, more efficient 100%? In our system, as you know, the conversations are always around the how. One of the things that I think is so good about our system is now we are digging in and we have got teams, particularly in the U.S., working through each of these elements. If you think about remodels, there are franchisees now who have a team who are going through line by line, item by item on the remodel, and I am sure they are going to find opportunities. They always do.

There is always a good conversation on that, and I would expect, as we get further into those conversations, we are going to get to a remodel program that we all feel really good about. On the other piece of this, which I know there has been conversation around hand-breaded chicken, is why we have the tests out there. We have got two ASTs, or advertised sales tests, in a couple of our cities in early 2027. Last week, I was in Ireland for a couple days with franchisees there, going and visiting their restaurants as they prepare for hand-breading. This is where McDonald's folks just get super excited because now they are getting into the operational details. How do we make this work? What are the challenges? How do we make it better? I do feel overall good about where franchisees are on NEXT.

I think they are appropriately digging into the how on those things, and we'll share with you progress as we go through 2027.

Our next question is from Dennis Geiger at UBS.

Morning, guys. Thanks a lot for all that detail on the U.S. strategy. Following the encouraging improvement in the U.S. trends through the quarter post the interventions that you noted, can you touch a little bit more on how you're thinking about that U.S. sales trajectory over the balance of this year, and any high-level thoughts to share on the path into 2027 as you think about the benefits from the interventions and the benefits from NEXT? Thank you.

Hey, morning, Dennis. It's Ian. Let me maybe start, and then I'll let Chris chime in maybe at the end. But I'd go back to what we said on the Q2 earnings call, because I think everything that we're doing and the results that we've seen in Q3 are all confirmatory to what we outlined there, which was that our focus was about how we got the U.S. business in a stronger position as we exit 2026. I think certainly we feel really good about the work and the decisions that Skye and the U.S. system collectively are putting into place.

I think we're, as you heard us say in our upfront remarks, we're encouraged by the baseline traffic trends that we've seen through September and now through October. I think we remain really confident that the U.S. is on the right path to exit 2026 in a stronger position. I might just also touch on IOM, because I'm sure that's a question that's coming. I just would say with IOM, I think as we outlined in our opening remarks, see in the majority of our large international markets, we're holding or gaining share. It's a soft consumer environment, but we're doing well. I think our international markets are very consistently executing that playbook of menu marketing and value.

As we look forward to Q4, I think the kind of conditions that we saw in Q3, we expect to be largely consistent through the rest of the year.

Our next question is from John Ivankoe with JPMorgan.

Hi. Thank you. I have had an opportunity to visit a fully operational next door with hand-breaded chicken. I will tell you, I'm very impressed to kind of see that operating in person. The point of the question is, when I look at the hand-breaded chicken platform, does it make more sense to maybe just pursue significant upgrades of the sandwich, of the strip, for example, as part of hand-breading, and maybe pursue those type of product categories versus going into what I think might just be a higher-risk category with bone-in wings? I do ask the bone-in wing question in the context of the Mighty Wings kind of experience of 10 years ago, if there's something significant maybe that we could have learned from that in terms of the ease of execution of that product. Thank you so much.

Hi, John. I think these are all things that right now, those are the details that we dig into with franchisees to figure out how we deliver this, what is the best way to go about improving the taste and quality of our chicken offerings. I was in Ireland, as I mentioned, last week, and one of the things that we are doing in there, and we have got in, I would say right now about 10 restaurants, is looking at two items, so strips and a sandwich versus three items, strip, sandwich, and wings, and getting good experience and feedback on that. I think one of the things, again, it is 10 restaurants, but we are seeing that wings provides really strong incrementality.

Again, it is in those 10 restaurants. It is really early, but that is an interesting learning. I think we are in kind of the now, how do we actually go about and execute this? What are the challenges? What are the issues? I think through that, we are going to learn whether there is the operational complexity of wings or three items outweighs the benefits that you get with incrementality.

Maybe the only hook, John, I think we have done a lot of work to understand kind of the, we call it menu architecture, but just looking at the kind of composition of the market. I mean, obviously, we are going to ultimately be led by what are customers looking for, and I think as Chris said, there may be some nuances market to market in that, but we certainly have had success with wings in a number of markets globally, and so we certainly know it is an opportunity area.

Our next question is from Sara Senatore of Bank of America.

Great. Thank you very much. Just maybe a quick clarification on the model and a question on the Make It Golden. So, you mentioned it is a large capability-building initiative on hospitality. I guess, how are you, or are you changing how you measure franchisees? I know you have, I think, the PACE metrics out there, but I am wondering if, as you pivot, kind of, are you focused on perhaps different metrics, if that has changed, what you are asking franchisees to be measured on or how often? Then just quickly on the model, it looks like pretty healthy gains on the sale of or the refranchising of IOM units. Any comments on how we should think about that going forward or what the implications for the rent and royalty might be? Thanks.

Hey, Sara. Thanks for the question. I will take the taste quality, kind of the PACE question, and then I will let Ian cover the second one. Yes, as you noted, we are focused on how do we go about assessing taste and quality. It is a big part of what we are trying to upgrade the system on.

through the training that we have got here with Make It Golden. I think probably the most notable change that we are making here is really enhancing the customer feedback portion of this. The core elements of how we assess restaurants from a food safety standpoint, what we are doing around making sure that we are doing the right things for our crew, all of those stay the same. But we have changed how we are going to be assessing customer satisfaction. We are rolling out in Q4 a new approach there across the U.S. It is on the way to going global. Then we are also, at the end of Q4, going to be introducing into the app where the customer is now going to be able to give us a review within the app on their experience.

All of that is going to go to giving us much better insight into how the customer is actually perceiving the experience that they are getting in the restaurants. When it comes to taste and quality, what ultimately matters is how the customer perceives it. For us to be able to move the needle on taste and quality, beauty is in the eye of the beholder, which is going to be the customer. We are making significant enhancements there to improve our visibility and the accuracy of the feedback that we are getting.

Morning, Sara, Ian. Let me maybe just touch on your question on gains. I think as we talked about kind of in the opening comments, gains are obviously up this year. That is, as you know, part of kind of the NEXT strategy of getting us by end of 2028 to 98% franchised globally. I think it has been about 175 restaurants so far in 2026 through U.S. and IOM segments that have been refranchised. I would expect that kind of level of activity to kind of carry forward in through the next couple years. Obviously, as you know, in the model, that has an impact on revenue, which is one of the reasons why our revenue was a bit down in Q3, because we moved that 100% revenue to obviously a franchised contribution of revenue.

I think looking forward, we feel really confident about the path to get us to the objective of 98% by end of 2028.

Our next question is from Andrew Charles at TD Cowen.

Great. Thank you. Ian, just quick clarification that you called out Q4 U.S. comps are positioned to see improvement through year-end. Just make sure that we got the right message that you expect Q4 U.S. comps to improve from Q3's level. And then Chris, my question was that, as a follow-up to an earlier question, that in the past, you guys have quantified U.S. owner-operator support for different initiatives, like the EVM revamp last September. I am curious, where does that support level sit for the next investments?

Let me clarify, Andrew, because I did not say that fourth quarter U.S. comps would be better. What I said and what we said in the opening remarks was I think we are encouraged by the improvement in baseline trends that we saw through September and into October. And I said we are on path to what we have said consistently, which is that we want the U.S. business to be in a stronger position as it exits 2026.

And then on the second topic in terms of the actual support that we are providing through NEXT, that varies country by country. It is one of the things that Skye is getting into right now with U.S. owner-operators is the exact complexion of that, how that breaks out between capital versus rent. All of that is work in progress right now. We do not have a final partnering program landed, but certainly we shared at Investor Day the broad parameter of what our investment would look like, and there is no change to that.

Our next question is from Dave Palmer at Evercore.

Thanks. Good morning. Question on the U.S. same-store sales outlook, and in particular, sort of the changes you are making and how you go to market with ideas. It sounds like you are making some tweaks there when you talk about Make It Golden, and you are testing value right now. I know there is a lot of investor concern about the curation of ideas and what that means for franchisee alignment, especially after the 2025 chicken introductions and value changes this year, and the sort of the redos of those. Any changes you are making in how you go to market and why you think the hit rate will be getting better going forward would be super helpful. Thank you.

Sure. Well, this is a topic you and I have spoken about before, David, and I will probably give you something similar there, which is certainly we have testing as part of our go-to-market approach. There is always a balance between where do we need to be fast and where do we need to be right. That is where we think about sort of one-way doors and two-way doors. The things that are really one-way doors that are important for us because it is tough to go backward, those we have got to get super right. We are very diligent about what we are testing there, the length of time that we are testing, the number of restaurants, et cetera.

You see with several elements of NEXT where we are taking that approach, and we will share with you the results and our progress as we move through 2027 on all of that. There are also areas where sometimes we just have different ideas. I think right now what you are seeing in the U.S. is there are different ways for us to go after entry-level value.

We are testing a variety of different approaches there to inform and get us the best way forward on that. But certainly there is a focus and alignment around entry-level value, right. It is the final piece missing. There will be areas where we have a lot of knowledge and information based on our experience around the world where we are ready and we just go. That is what we did with EVMs, as you will remember about a year ago, where we knew where we needed to be on EVMs based on what we saw around the world.

We did not test EVMs, we just went ahead and did it, and I think that proved to be the right decision. This is something we are always in conversations on with our franchisees. There is not a one-size-fits-all approach on this, but it is really about the size of the decision, the permanence of the decision, and making sure that we get it right.

Our next question from Danilo Gargiulo at Bernstein.

Great. Good morning. A quick clarification and the real question specifically on IOM. The clarification is, to what extent are the protests weighing on your results right now? Anything to call out in the IOM markets, because we have seen some rising protests in the major markets. If there is anything that you are willing to share regarding the impact on McDonald's, so we can normalize for next year. The real question is, it is really encouraging to see that you are maintaining or actually gaining market share in some of your IOM markets. At the same time, we are seeing some macroeconomic pressures that are mounting. We have seen some prints from CPI in some countries that is actually very elevated. To what extent do you expect IOM to be positive comps into next year?

What do you have under control versus how much macro could be weighing your results next year? Thank you very much.

Yeah, Danilo, thanks for the question. Certainly, there's a lot going on in Europe, and part of what we called out in our comments is particularly France and Ukraine are two markets that are weighing on the performance there. As you know, in both of those countries, there's significant external issues that are going on. I do think that there is an impact, and we're expecting that impact to continue, I think, for certainly into Q4. Hopefully we get to a better place on both of those as we move into 2027. In terms of your read on the macroeconomic situation, certainly it's muted in Europe, and I think you know all the reasons why.

Our focus is always about gaining share, and I think what we're encouraged is that we're maintaining or gaining share in the majority of our markets, both in Europe as well as more broadly in international. Control what you can control, and the macro's going to be the macro, but so long as we are gaining share in the majority of markets, that really is what we're setting ourselves up to be able to do in 2027.

Maybe the only hook, Danilo, just from me would be just to kind of emphasize, I think, what Chris has talked about. I mean, I think we're seeing consistency of results across most of our top IOM markets, and that always gives you confidence, as we said in our opening remarks, that they're implementing the playbook. The playbook is working, and I think they're leaning into the opportunities they've got despite the kind of macro around them.

I mean, the opportunity we've got to address is France. As Chris talked about in his upfront remarks, we think we've made a really significant step forward with our system, our franchisees in France, to get some of our internal structural barriers addressed and allow us to be able to operate a lot more efficiently and with a lot more agility to get the right plans going in France as we work through 2027.

Great. Thanks for taking the question. I was hoping you guys could elaborate a little bit more on the eight-week value test that you mentioned, and maybe just what you're seeing, how you're measuring the success of that platform, and why is the EVM discounts just not enough? Why do you need to go further? Just a little bit more detail on that would be helpful. Thanks.

Sure. Regarding the value test, they started last week, so I think it would be premature to share any results after one week. We will measure those tests the same way we measure most of our value tests, which is around incrementality, and do they drive that incremental sales, which ultimately then drives franchisee economics. So it is going to be looking at the incrementality of those, the take rates on those, and feeling good about what we are seeing there. Then on EVMs and why it is not sort of enough in and of itself, it goes back to sort of how we think about value, and there are three elements.

There is a variety of elements, I should say, that you need to get right. You need to get right your menu prices, so on the menu board, and we are in a good place there on menu board prices. You need to get your meal bundles right, and I think we're in a good place there because of where we are with EVMs, but also remember we've got that $5 and $6 meal. Then you need to have good entry-level value, and particularly for that low-income consumer, they're looking for great entry-level value, and we have not had that in place to the level that we are satisfied with. We talked quite extensively about how Q2 we didn't land that like we needed to, and that's what we're in the midst of getting resolved right now and through testing.

We expect in early 2027 that we'll have the answer from that test and then be able to have entry-level value. At that point, I think we'll feel really good that we've got kind of the full suite of value offerings that we need and can drive the business in 2027.

Maybe just a small build. I think it goes back to what we've talked a fair bit about before. We've got such good experience in our International Operated Markets where we've got all of those components in place, and I think we certainly believe that's been one of the fundamental baseline drivers of the consistency of our results there, is we've had those options in place. They've largely been in place for a longer period of time, and they're clearly working because we're winning share in those challenging marketplaces, and I think value's been a core component of that.

All right, next question is from Jon Tower at Citi.

Great. Thanks for taking the question. I was hoping we could dig into the beverage platform in the U.S. specifically. So far, it sounds like it has been a nice platform for you. I am curious if you could speak to what customers you are drawing in, where they are coming from. It sounds like it is hitting in the afternoon well for you, and not cannibalizing the existing specialty platform, but perhaps the other beverages that you have on the menu are not getting picked up as much. I am curious about your experience so far with that consumer. Are they seeking a greater velocity of new news than the existing base, and therefore, going forward, are you going to have to kind of keep that wheel moving at a faster turn than perhaps the base menu?

Morning, John. Let me start, and I am sure Chris may want to weigh in. I think what we have talked about with beverages, I know you are asking about the U.S., but I think we are seeing very, very consistent results in every market so far that we have deployed beverages, which I think is why we are so confident in the opportunity that this is going to be a multi-year growth platform for us and ultimately kind of get us to that 1.5% market share goal gain that we outlined at our Investor Day. I think U.S. specifically, what we are seeing, which is why we are very enthusiastic about the opportunity, is that more than half of the occasions are coming after lunch. They are coming at periods of the day where the restaurants are generally less busy. We have got capacity.

I think that is a strong confirmation that there is kind of a good incrementality to those visits. We are seeing strong check in transactions that include a beverage, in general, about 50% higher than the overall average day check. So we are seeing strong food attachment. The customer base skews younger, so we know it is resonating with the kind of key consumers that are in the category in the general marketplace. For sure, I think any part of the menu, consumers want some of that kind of new news. You have got to start though with the fundamental that the goal is to deliver great-tasting, high-quality, everyday choice that appeals to consumers, and delivering that, which I think is what our unique proposition is great value for money relative to what is available in other parts of the market.

I think our foundational layer is doing that really well. As I talked about in my opening remarks, we are starting to rotate some new news. Germany did that in the quarter with what they called their Aperol Spritz, which was their best-performing beverage in the portfolio in the quarter. So we know new news is going to be important. Obviously, we just want to make sure we are doing that at the right pace while continuing to kind of invest in the underlying platform. As far as cannibalization, of course, there is going to be some element of cannibalization, like any time you are kind of adding incremental options to the menu.

But I think what we are trying to really emphasize is there is clear incrementality. We know beverages are driving incremental visits and incremental sales for restaurants, and ultimately, that means, of course, incremental profitability for the franchisees and for the restaurant. It is all of those things together that are getting us even more convicted about the opportunity and the fact that we are seeing that consistently in each market that is bringing the opportunity to life.

The only thing I would add, I think Ian covered that really well, but as you think about long term, we do think that there is an opportunity and a need for us to offer an even broader assortment of beverages. Part of what is inherent in the next remodels is we just need to increase space for beverages. We do not have adequate space in back of house to be able to offer our full ambition of what we want to do in beverages. Part of that, actually one of the most significant investments associated with the next remodel is actually increasing what we call the beverage cell to give ourselves the platform to offer that broader variety of beverages going forward.

Our next question is from Andy Barish at Jefferies.

Yeah, good morning, guys. Wondering if you could address the marketing advantage dollar-wise you guys have is obviously significant, but the messaging just does not seem to have cut through, if you will. Are there any changes you can highlight at this point just in terms of maybe where that message is being delivered and how some of the marketing spend is shifting between channels, perhaps?

Yeah, sure, Andy. We would agree. The marketing has not been where we would set the standard at for McDonald's. That's certainly something that Skye and the team are getting after, and I feel good about some of the initial thinking that I've seen there and more to come on that. We talked a lot about it at Investor Day, as you know, Consumer > NEXT and how we're thinking about changing our go-to-market approach, changing our demand generation approach. Really emphasizing and leveraging the fact that McDonald's is one of the world's biggest global brands, and we can generate talk value that few other brands do. We haven't, in my estimation, and I know Morgan would share this as well, we haven't done as much as we could to harness that and really channel it into driving brand love for us.

That is going to be something that you're going to see us doing increasingly over the next several years.

Our next question is from Chris O'Cull at Baird.

Good morning, and thanks for taking my question. Where do discussions with franchisees stand on getting better alignment around pricing across the full menu heading into next year, not just the advertised value offers? I'm just curious what needs to change to make the execution more consistent from restaurant to restaurant? Lastly, I think you guys had mentioned in the past that you expected system pricing to be in the mid-single-digit range at some point in the fourth quarter. I'm just curious if that was still the plan.

Sure. We are always in conversations with franchisees around pricing. I think largely focused on the U.S. right now, but largely we are in a good spot with the exception of this entry-level value. Our base menu pricing, as we compare and benchmark versus our competitors within the trading area, we are at a discount in the vast majority of our restaurants in the U.S. on base menu pricing. We feel good about that. As I mentioned, we feel really good about where we are with our meal bundles and other elements. I do not think we have a problem in the U.S. You always have to stay vigilant on it, and it is a dynamic environment, so we are going to constantly keep looking at it. But we are starting from a good position on that.

As you think about 2027, certainly we are still expecting to see mid-single-digit food and paper inflation, and that is higher than, as you know, our long-term historical trends there. It is going to continue to be a sort of a needle that we are going to have to thread of how do we make sure that we are getting pricing through to account for the inflation that we are seeing, but also make sure that we continue to lead with customers who are offering great value and affordability.

Next question is from Brian Bittner at Oppenheimer.

Thank you. Good morning. You guys talked about several action plans you took to improve baseline sales during the quarter and into 4Q, and one of those was the restoration of national digital offers. Can you maybe help us understand how big of a business this is for you, or maybe you can explain how impactful it is when you do get it right? In the same vein, can you also update us on what you are seeing with that low-end consumer? Some of your peers that have reported earnings already are talking about some improvements in this important cohort for the first time all year, and just curious maybe what your updated thoughts on the low end is.

Yeah. Morning, Brian. It's Ian. Let me start, and then I'm sure Chris may want to weigh in. I mean, I think you're right. We talked about a number of areas of intervention through Q3, and one of those was to partially restore national digital offers, which are really, really important for our high-frequent users, our loyalty members. I think that was certainly one of the things that contributed to the improvement in our baseline traffic momentum that we talked about. But we also said we've got more work to do, and that's certainly what Skye and the U.S. system are focused on through the rest of the year. I mean, our loyalty membership in the U.S. is almost 30% of our customer base, so it's a really important part. It's a part of our customer base that we interact with on a very regular basis.

McDonald's (MCD) Q3 2026 Earnings Call Transcript

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