🍔 What the Company Does
McDonald’s Corporation (MCD) is a global quick-service restaurant (QSR) company. QSR means fast food designed for speed, convenience, and affordability. McDonald’s operates and franchises restaurants worldwide, and most locations are franchised (run by independent operators who pay fees and rent to McDonald’s).
- Core model: Franchise fees and rent, plus sales from company-operated restaurants
- Global footprint: Restaurants across more than 100 countries
- Key driver: A franchise-heavy structure that supports steady cash flow
📊 Financial Highlights
In FY2025, McDonald’s reported higher revenue and operating income compared with FY2024. Operating margins remained very high for a consumer business, reflecting the economics of a franchise-led model. Earnings per share (EPS) also improved in FY2025.
- Total revenue: Increased year over year
- Operating income: Increased year over year
- EPS: Improved in FY2025
- Cash flow: Operating cash flow remained strong, supporting reinvestment and shareholder returns
⚠️ Key Risks
McDonald’s risk factors are closely tied to its global franchise system and the restaurant industry’s operating realities.
- Franchise model risk: Performance depends on franchisee financial health, compliance, and operational execution.
- Food safety and supply chain: Incidents, shortages, or commodity cost swings can harm trust and profitability.
- Labor costs and staffing: Wage pressure and hiring challenges can affect operations and margins.
- Global exposure: Currency movements and regional regulatory changes can impact reported results.
- Technology and cybersecurity: Digital ordering and loyalty systems increase reliance on stable, secure technology.
🧾 MD&A (What Management Focused On)
Management emphasized franchise-driven profitability, strong operating cash flow, and disciplined capital allocation. The company continued investing in restaurant development, remodels, and digital initiatives while returning cash to shareholders through dividends and share repurchases.
- Revenue mix: Growth supported by franchised restaurant revenues
- Profitability: Operating income growth and continued high margins
- Capital returns: Continued dividends and share repurchases
- Cash generation: Strong operating cash flow remained a central theme
✅ Takeaway
McDonald’s FY2025 10-K shows a mature, cash-generative business built on a global franchise system. Results reflected continued revenue and operating income growth, supported by a high-margin model. The company also highlighted ongoing operational risks (food, labor, supply chain, technology) that are important for beginners to understand when evaluating a global restaurant business.
Income Statement Summary 💵
Unit: $m (millions), EPS in $
| FY 2023 | FY 2024 | FY 2025 | |
|---|---|---|---|
| Revenue | 25,494 | 25,920 | 26,885 |
| Cost of Goods Sold | 11,030 | 11,349 | 11,452 |
| Gross Profit | 14,464 | 14,571 | 15,433 |
| SG&A | 2,817 | 2,859 | 3,040 |
| Operating Income | 11,647 | 11,712 | 12,393 |
| Non-Operating Income/Expense | 236 | 139 | 87 |
| Interest Income/Expense | (1,361) | (1,506) | (1,582) |
| Income Before Tax | 10,522 | 10,345 | 10,897 |
| Income Tax | (2,053) | (2,121) | (2,334) |
| Net Income | 8,469 | 8,223 | 8,563 |
| EPS | 11.6 | 11.4 | 12.0 |
Plain English: McDonald’s grew total revenue from FY2024 to FY2025, and operating income rose as well. The business generates very large operating profit relative to revenue, but interest expense is still a meaningful ongoing cost. EPS improved in FY2025, reflecting higher profits and a share count that continues to trend down over time due to buybacks.
Key Financial Ratios 📌
Unit: % (percent), except ratios marked (x)
| Ratio | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|
| ROE (%) | (158.2) | (193.4) | (306.6) |
| ROA (%) | 16.8 | 14.8 | 14.9 |
| ROTC (%) | 33.6 | 33.8 | 32.5 |
| ROIC (%) | 31.2 | 27.8 | 26.1 |
| Gross Margin (%) | 56.7 | 56.2 | 57.4 |
| Operating Margin (%) | 45.7 | 45.2 | 46.1 |
| Pretax Margin (%) | 41.3 | 39.9 | 40.5 |
| Net Margin (%) | 33.2 | 31.7 | 31.8 |
| Debt-to-Equity Ratio (D/E) (%) | (835.9) | (1,011.8) | (2,231.5) |
| Net Debt / EBITDA (x) | 2.6 | 2.7 | 2.7 |
| Interest Coverage Ratio (x) | 8.6 | 7.8 | 7.8 |
| Current Ratio (%) | 116.5 | 119.1 | 95.5 |
| Quick Ratio (%) | 103.0 | 89.8 | 74.3 |
| Fixed Asset to Long-term Capital Ratio (%) | 76.8 | 73.1 | 74.0 |
Plain English: McDonald’s profitability remains strong: operating margin stayed in the mid-40% range, and ROIC remained high (mid-to-high 20s). Net leverage (Net Debt / EBITDA) stayed around 2.6–2.7x, which is moderate for a mature, cash-generative business. The unusual-looking ROE and D/E are driven by negative common equity (a shareholders’ deficit), which often happens when a company returns large amounts of cash via buybacks over many years—so those two metrics become less intuitive and should be interpreted carefully.
📝 Disclaimer
This article is intended for educational purposes only. It does not constitute financial, investment, or legal advice. All investment decisions involve risks, and readers should conduct their own research or consult with a licensed financial advisor.
👉 McDonald’s Corporation (MCD) FY 2025 10-K Analysis (Filed 2026) | Explained for Beginners