McDonald’s Bets on Bigger Balance Sheet and Smaller Burgers to Outrun a Slowing Consumer

A year that ended with record socks and record sales

McDonald’s closed 2025 much as it began it: using its sheer scale to turn pop culture into throughput and digital engagement into financial leverage.

System-wide sales reached nearly $140bn, up 5.5 per cent in constant currencies, on the back of just over 3 per cent global comparable sales for the full year and 5.7 per cent in the fourth quarter. Chief executive Chris Kempczinski framed the performance as a victory in a “challenging industry backdrop,” pointing repeatedly to a disciplined focus on value, marketing and menu innovation – the now-familiar “3 for 3” formula.

In the U.S., that formula translated into a 6.8 per cent rise in fourth-quarter comparable sales, with both average check and guest counts in positive territory and what finance chief Ian Borden called the strongest quarterly guest-count gap to “near-end competitors” in recent memory. The company’s sprawling Minecraft movie tie-up and a Christmas-season Grinch promotion – which briefly turned McDonald’s into the world’s largest sock retailer, with 50m pairs sold in days – drove record digital activations and the highest single sales day in the chain’s history.

Behind the headlines, the balance sheet remained as disciplined as the marketing flamboyance was exuberant. Adjusted operating margin for 2025 came in at 46.9 per cent, in line with prior guidance, with more than $15bn of restaurant margin dollars generated across the system. Adjusted EPS in the fourth quarter rose 7 per cent in constant currency to $3.12, including a $0.10 tailwind from foreign exchange.

Value as “greens fees” – and a barbell for a bifurcated consumer

If the spectacle came from tie-ins and collectibles, the commercial engine in 2025 was more prosaic: sharpened value architecture.

In the U.S., McDonald’s rolled out its McValue platform early in the year and then relaunched Extra Value Meals (EVMs) in September, targeting a clear 15 per cent discount to à la carte pricing and anchoring that with national price points such as a $5 sausage, egg and cheese McGriddles meal and an $8 10-piece Chicken McNuggets meal. The campaign appears to have done its job. By the fourth quarter, the chain was gaining share among lower-income consumers and seeing “meaningful” improvements in value and affordability scores, even as U.S. franchisee cash flow rose year-on-year.

Kempczinski described value and affordability as the “greens fees” of the quick-service game: the basic cost of entry rather than a differentiator. Borden added that the key to sustainable profitability lay not in resisting lower price points but in driving higher volume – pointing to U.S. owner-operator cash flow growth as evidence that the strategy was not coming at the expense of system economics.

Internationally, the same logic is being applied through Everyday Affordable Price (EDAP) offers and menu bundles across the “Big 5” operated markets. The U.K., Germany and Australia all delivered mid- to high-single-digit comparable growth in the quarter. The U.K., which has been through a public turnaround, posted market-share gains for the first time in over a year as value scoring steadily improved, aided by its own Grinch and “Menu Heist” promotions.

At the other end of the barbell, management signalled that premium news is coming – particularly in beverages. The implicit bet is that McDonald’s can cater simultaneously to a pressured low-income cohort seeking sharp price points and to higher-income customers who, in Kempczinski’s words, still have “mid single-digit” growth potential and are more open to trading up.

A development machine in full stride

Perhaps the most striking datapoint in this quarter’s narrative, however, lies not in the income statement but in the company’s accelerating footprint.

In 2025 the chain opened about 2,275 restaurants and closed fewer than 400, for net unit growth of roughly 1,880. That pace will quicken: in 2026 McDonald’s plans approximately 2,600 gross openings and about 2,100 net additions, implying roughly 4.5 per cent unit growth. Around 750 of the new sites will be in the U.S. and other company-operated markets, but the bulk – more than 1,800 – will land in developmental license territories, including roughly 1,000 in China, where the brand now has a presence in every province.

The capital outlay is hefty. McDonald’s spent $3.4bn in capex in 2025, slightly above its own range, in part to get ahead on the 2026–27 development pipeline. This year that figure is expected to rise to between $3.7bn and $3.9bn, broadly consistent with management’s Investor Day promise to ratchet capex by $300m–$500m annually as the system marches toward 50,000 restaurants by the end of 2027.

Borden stressed that the decision to push harder on development, even in mature markets with modest population growth, is grounded in returns. First-year sales and unit economics on new builds in markets like the U.S., which had been under-developed during years of population shifts, are “confirmatory” that the sites are being chosen well, he argued. The company expects net restaurant expansion, combined with recent openings, to contribute about 2.5 per cent to system-wide sales growth in 2026.

The capital allocation hierarchy remains orthodox: reinvest for growth, pay a dividend – now raised for 49 consecutive years – and then repurchase shares with remaining free cash flow. Management expects free cash flow to net income conversion to remain in the low-to-mid-80 per cent range in 2026, broadly in line with this past year’s 84 per cent.

Digital, data and the quiet transformation of the back end

Behind the more visible story of new units and new meals lies a quieter but arguably more consequential shift in how McDonald’s runs itself.

Since launching the “Accelerating the Arches” strategy in late 2020, the group has built a global business services function, a centralised revenue growth management team and, crucially, a much more standardised technology stack. The ambition is to operate on three common platforms – consumer, restaurant and corporate – rather than the previously fragmented patchwork.

The results are most tangible in the digital business. Loyalty, which barely existed in the U.S. four years ago, generated about $20bn of system-wide sales in 2023 and almost double that in 2025, with nearly 210m 90-day active users across 70 markets. The company is targeting 250m active users by the end of 2027.

The behavioural impact is sharp. In the U.S., an average customer visited 10.5 times in the year before joining loyalty; in the 12 months after enrolment, that figure jumps to 26 visits. The app is now the gateway for large digital events such as the MONOPOLY promotion, which alone saw nearly 500m games played and helped bring U.S. 90-day actives to about 46m.

These digital touchpoints are increasingly being linked to operational tools such as Ready on Arrival – a system deployed in McDonald’s top six markets that preps orders before the customer reaches the drive-thru or counter, cutting wait times and lifting satisfaction scores. Management also highlighted nascent work with voice ordering, shift-management tools and other AI-enabled systems designed to make restaurants easier to run.

Foreign exchange, usually an unglamorous factor in all this, is set to offer a modest boost. Based on current rates, McDonald’s expects FX to provide a $0.20–$0.30 tailwind to 2026 EPS. Interest expense, by contrast, is guided up 4–6 per cent, largely on higher average rates, while the effective tax rate is expected to sit between 21 and 23 per cent, with the usual quarter-on-quarter volatility.

A new power structure in the kitchen

If technology and capital allocation are reshaping the corporate hinterland, the front line – the menu and the kitchen – is being reorganised under Jill McDonald’s nine-month-old “restaurant experience” structure.

The new team pulls together operations, supply chain, menu and marketing under a category-management model with dedicated leaders for beef, chicken and beverages. The aim is both speed and accountability: ideas should move from test to global scale more quickly, and each category should be managed as its own growth vertical.

On beef, the centrepiece is the “Best Burger” programme, now in more than 85 markets and due to reach nearly all by the end of 2026. The initiative tweaks cooking methods and assembly to deliver hotter, juicier burgers, while simplifying tasks for crew. A heftier burger line, the “Big Arch,” has graduated from pilot to a permanent menu spot in the U.K. and is positioned as a heartier option that still feels distinctively McDonald’s.

In chicken – a category McDonald’s notes is twice the size of beef globally and growing faster – the chain has deployed its McCrispy sandwich “equity” to almost all major markets, and has set itself a target of gaining at least one percentage point of share by the end of 2026 in its top 10 markets versus late 2023. The company is also quietly testing “new flavor combinations and new ways of cooking” in select Chicago-area restaurants, hinting at future formats.

Beverages may be the most immediately investable story. The company sees a global addressable market north of $100bn and is preparing a new U.S. beverage line-up, under the McCafé brand, for later this year. The offer, tested in more than 500 U.S. restaurants in the fourth quarter, spans indulgent iced coffees, “fruity refreshers,” energy drinks and crafted sodas, including a Red Bull collaboration that McDonald’s plans to extend both in the U.S. and abroad.

The tests “exceeded expectations,” delivering incremental snack, dinner and evening occasions and higher average checks. Australia’s own small-scale beverage test late last year is feeding into global tweaks on recipes and flavour profiles. In a sector that has watched Starbucks struggle to re-ignite growth and independent speciality chains face rising costs, a scaled McCafé beverage push inside the existing McDonald’s box could be a significant profit lever.

Navigating GLP‑1s, weather and the next downturn

The management tone on the macro environment was sober. Borden repeatedly described the quick-service backdrop as “challenging” and suggested that 2026 comparable-sales growth would likely be stronger in the first half than the second, helped by easier year-on-year comparisons.

In the nearer term, January’s severe weather in the U.S. and parts of Europe has already knocked trading. McDonald’s estimates that storms will shave about 100 basis points off U.S. first-quarter comps, with some drag also felt in international operated markets where restaurants closed or cut hours.

Longer term, investors are watching for the impact of GLP‑1 weight-loss drugs on eating habits. For now, Kempczinski says the company cannot see a “material impact” in its data, but it expects adoption to rise as oral formulations roll out. The early behavioural signals – fewer daily calories overall, less snacking and sugary drinks, but strong demand for protein – dovetail with the chain’s growing emphasis on chicken and beef, and with more protein-forward breakfast and snack offers.

Jill McDonald pointed out that the current menu already offers a range of higher-protein items – from fish to Snack Wraps and sausage biscuits – and suggested McDonald’s could simply do a better job flagging those to GLP‑1 users. Longer-term innovations tailored to these customers are in the works, but management was clear that customer demand, rather than medical fashion, will drive decisions.

Even in pricing, the company is trying to walk a fine line. Franchisees retain legal autonomy over menu prices, but McDonald’s is tightening brand “guardrails,” making it clear that its public identity as a value leader must be preserved. That implies more consistent discounting through EVMs and value menus, supported over time by labour-saving technology and higher-margin premium offers, rather than a reliance on across-the-board price increases.

Positioned to “outperform in any environment” – with execution risk attached

The architecture of the McDonald’s story at the end of 2025 is strikingly coherent. The company has built a large, engaged digital audience; it is standardising its technology backbone; it has reorganised its kitchen and menu development around growth categories; and it is investing heavily in new units, particularly in markets like China, where it expects the long-term demand curve to remain steep despite near-term macro unease.

The financial framework – mid- to high-40s operating margins that management expects to expand in 2026, a dividend approaching half a century of increases, and a disciplined capex ramp tied to concrete unit targets – offers comfort to investors who prefer visibility over flash.

Yet the strategy also raises execution questions. The plan to reach 50,000 restaurants by 2027 assumes stable returns from a development push that will inevitably include some more marginal sites. The loyalty machine depends on continued relevance of promotions and the smooth functioning of increasingly complex digital systems. A beverage-led McCafé revival inside the base business will demand retraining, re-equipping and careful capacity management in kitchens that are already tightly choreographed.

Kempczinski, for his part, sounded anything but tentative. McDonald’s, he argued, is now “a fundamentally different company” than it was in 2020, with the tools to “outperform the competition in any environment.” June’s worldwide convention in Las Vegas, and an investor update planned for the autumn, will offer the next checkpoints on whether the world’s biggest burger chain can keep turning big pictures and small tweaks into outsize returns.