McDonald's Earnings Call Contradictions: U.S. Sales Trajectory Shifts and Franchisee Profitability Signals Clash

Date of Call: Aug 4, 2026

Financials Results

• Revenue: Systemwide sales grew 4% in constant currency. Global comparable sales grew 1.3%.
• EPS: Adjusted earnings per share of $3.38, which included a $0.03 benefit from foreign currency translation. Constant currency EPS represents a 5% increase versus the prior year.
• Gross Margin: Year-to-date adjusted operating margin was 46.9%.
• Operating Margin: Year-to-date adjusted operating margin was 46.9%.

Guidance:

• U.S. comparable sales were impacted by execution issues; actions are being taken to address value execution and marketing programs.
• For international markets, comps expected to accelerate sequentially in Q3.
• The 50,000 restaurant target globally is now expected in 2028 instead of 2027 due to consumer and inflationary pressures.
• G&A expenses expected to be about 2.2% of systemwide sales for the full year.
• A tailwind of about $0.15 from foreign currency translation on full year 2026 adjusted EPS.

Business Commentary:

U.S. Sales Performance and Execution Challenges:

• McDonald’s reported U.S. comparable sales growth of 0.8% for Q2, which was below expectations.
• The underperformance was attributed to inconsistent execution of the new EDAP menu, high franchisee participation variability, and reduced digital offers impacting loyal customers.

Value and Affordability Strategy:

• McDonald’s has seen a significant rebound in value and affordability scores in the U.S., with improvements of 7 to 8 points.
• This was achieved through adjustments in base menu pricing, successful meal deals, and the reintroduction of Extra Value Meals (EVMs).

International Market Performance:

• Global comparable sales grew 1.3%, with positive growth across all operating segments.
• Strong execution in markets like Germany, Australia, and the U.K., supported by value offerings and marketing, contributed to this performance.

Beverage Platform Launch:

• The new beverage platform launched in May showed early success, with sales exceeding expectations in key markets like the U.S., Canada, and Germany.
• The introduction of new beverage options led to increased guest checks and higher average check sizes, with notable contributions from energy drinks.

Leadership Transition in the U.S.:

• Skye Anderson was appointed as the new President of McDonald’s U.S., effective immediately.
• Her extensive experience and previous successes in driving sales and operational improvements were highlighted as reasons for her appointment.

Sentiment Analysis:

Overall Tone: Neutral

• Management acknowledged U.S. underperformance due to execution issues, stating 'we don't have a strategy problem. We simply didn't execute at the level we needed to.' They are taking urgent action to address these issues but expressed confidence in long-term growth with new strategy McDonald’s > NEXT.

Q&A:

• Question from David Palmer (Evercore): Could you double-click on the U.S. near-in and medium-term opportunities for improvement?
  Response: Value and affordability leadership is largely restored with base menu pricing, meal deals, and EVMs performing well, but the EDAP menu launch had inconsistent execution and low awareness, impacting traffic. Actions are being taken with franchisee alignment to fix this.

• Question from Dennis Geiger (UBS): How quickly can the execution, ops, and marketing issues be addressed, and what does this mean for U.S. sales trajectory?
  Response: Operations improvements should be fastest, marketing adjustments possible in Q4, and value program fixes require alignment with franchisees. U.S. comps were slightly negative in July, but actions are underway to improve execution and momentum by the end of 2026.

• Question from Brian Harbour (Morgan Stanley): Why was there lower franchisee participation in the EDAP program, and how will you ensure better alignment?
  Response: Some franchisees did not execute the recommended pricing for the EDAP menu, possibly due to its flexible structure allowing price inflation. Education and performance data, along with business review discussions, will address non-compliance, with strong franchisee alignment on value leadership.

• Question from John Ivankoe (JP Morgan): Regarding customer satisfaction surveys, is there an opportunity to improve company vs. franchise store performance and move underperforming stores?
  Response: Customer satisfaction data shows a step back in Q2, but overall improvement over time. The focus is on elevating taste, quality, and hospitality through McDonald’s > NEXT. The system is always looking to place restaurants with the best operators to maximize performance.

• Question from Sara Senatore (Bank of America): Could the accelerated restaurant growth impact same-store sales, and has anything changed in your marketing process?
  Response: The 50,000 target was adjusted to 2028 due to external pressures, not a change in development opportunity. Marketing is evolving to focus more on customer engagement and long-term baseline growth, being careful with 'borrowed equities' to drive sustainable value.

• Question from David Tarantino (Baird): Given franchisee cash flow pressure, how difficult will it be to get investment for U.S. operations and value improvements?
  Response: McDonald’s > NEXT is not a major remodel program but leverages the normal 10-year remodel cycle. Productivity opportunities and healthy franchisee balance sheets provide confidence in self-funding improvements, with more details at Investor Day.

• Question from Jon Tower (Citi): Can you discuss the balance between new product news and store operations given the 'too many deployments' comment?
  Response: Too many simultaneous launches (e.g., K-Pop Demon Hunters, EDAP menu, beverage platform, FIFA) overwhelmed restaurant teams and diluted customer messaging. The calendar for the balance of the year is being scrutinized to ensure effective execution and break-through awareness.

• Question from Lauren Silberman (Deutsche Bank): Can you expand on beverage performance, including attachment and energy drink contribution?
  Response: The new beverage platform launched in the U.S., Canada, and Germany in Q2 is performing above expectations, driving incrementality, higher average checks, and increased traffic, especially after lunch. Energy drinks are a strong performer, with more markets to follow.

Contradiction Point 1

U.S. Sales Trajectory and Comps Expectation

Expectations for U.S. sales momentum shift from deceleration to a focus on year-end acceleration, impacting the outlook for near-term performance.

What were the key takeaways from the earnings call? - Dennis Geiger (UBS)

2026Q2: U.S. comps were slightly negative in July, but focus is on strengthening baseline momentum by year-end 2026. For International Operated Markets (IOM) and International Developmental Licensed Markets (IDL), comps are expected to accelerate sequentially in Q3. - Chris Kempczinski(CEO), Ian Borden(CFO)

How quickly can the flagged execution, operations, and marketing issues be resolved, and what impact will this have on the U.S. sales trajectory? - Dennis Geiger (UBS)

2026Q1: For Q2, comps are expected to decelerate from Q1's 3.9% due to a difficult April (lap of Minecraft promotion), but momentum is expected to continue post-April. - Chris Kempczinski(CEO), Ian Borden(CFO)

Contradiction Point 2

Franchisee Profitability and Investment Outlook

Assessment of franchisee financial pressure changes from acknowledging near-term strain to stating strong health and uniting on value investment, affecting expectations for investment capacity and partnership dynamics.

David Tarantino (Baird) - David Tarantino (Baird)

2026Q2: The U.S. is approaching a normal 10-year remodel cycle, which provides a natural investment cadence. Franchisee financial health remains strong, and the system is united on the need for value leadership to drive profitable growth. - Chris Kempczinski(CEO), Ian Borden(CFO)

How challenging will securing franchisee investment in U.S. operational/value initiatives be, given cash flow pressures? - David Tarantino (Baird)

2026Q1: Both U.S. and IOM franchisees are feeling pressure on profitability due to inflation (e.g., beef, energy costs). There is more potential inflation on the horizon for late 2026/2027. - Chris Kempczinski(CEO), Ian Borden(CFO)

Contradiction Point 3

Pace and Nature of Marketing and Operational Execution

Conflicting statements on the readiness and timing of marketing adjustments and operational fixes, creating uncertainty about the company's ability to address performance issues.

Dennis Geiger (UBS) - Dennis Geiger (UBS)

2026Q2: Marketing adjustments are possible for Q4 but not Q3... Actions are already underway, including digital offers and reallocating marketing spend... - Chris Kempczinski(CEO), Ian Borden(CFO)

How quickly can the flagged execution, operations, and marketing issues be resolved, and what impact will this have on the U.S. sales trajectory? - Dennis Geiger (UBS)

20260212-2025 Q4: The strategy for 2026 is built on three pillars... 2) **Marketing** (a strong lineup of campaigns, including lessons learned from record-setting events like Minecraft and The Grinch)... - Christopher Kempczinski(CEO), Ian Borden(CFO)

Contradiction Point 4

U.S. Same-Store Sales Trajectory and Expectations

Contradiction on the expected strength of the U.S. sales trajectory in the near term, moving from a narrative of strong momentum to one of recent weakness needing recovery.

Dennis Geiger (UBS) - Dennis Geiger (UBS)

2026Q2: U.S. comps were slightly negative in July, but focus is on strengthening baseline momentum by year-end 2026. - Chris Kempczinski(CEO), Ian Borden(CFO)

How quickly can the flagged execution, operations, and marketing issues be resolved, and what impact will this have on the U.S. sales trajectory? - Dennis Geiger (UBS)

20260212-2025 Q4: The U.S. business showed strong momentum in Q4 with the highest recent comparable guest count gap to competitors and positive guest count growth, indicating a solid foundation. - Christopher Kempczinski(CEO), Ian Borden(CFO)

Contradiction Point 5

U.S. Value Leadership Strategy and Franchisee Alignment

Conflicting statements on franchisee compliance and the nature of value program support, affecting the perceived effectiveness and enforcement of company strategy.

Brian Harbour (Morgan Stanley) - Brian Harbour (Morgan Stanley)

2026Q2: The 10-item-under-$3 EDAP menu allowed more pricing flexibility, leading to some non-compliance (estimated 30-35% of the system). - Chris Kempczinski(CEO)

Why did franchisee participation in the EDAP program vary, and how will you improve alignment moving forward? - David Tarantino (Robert W. Baird)

2025Q3: Corporate support includes $40 million in incremental marketing... Support ends after Q1 2026. - Ian Borden(CFO), Christopher Kempczinski(CEO)