McDonald’s Targets 98% Franchise Mix, Higher Margins Through 2030

McDonald’s Corporation (NYSE:MCD) shares are up on Thursday as inflation outlook remains a key overhang even with S&P 500 futures down 030%. The stock’s small bounce is coming after fresh commentary pointing to continued pressure on consumer spending and restaurant traffic. McDonald’s shares hit a four-year low on Wednesday and are heading for a seventh consecutive weekly loss. This marks the worst streak since July 2014. On Wednesday, the company outlined new long-term growth and profitability targets at its 2026 Investor Day while acknowledging gaps in restaurant execution. Targets Restaurant Efficiency & Boost Franchise Mix NEXT focuses on four pillars. Menu > NEXT aims to improve taste, quality and innovation. Consumer > NEXT focuses on personalization and visit frequency. Restaurant > NEXT centers on simpler operations, restaurant modernization and GenAI-enabled ArchIQ. People > NEXT aims to improve hospitality and consistency. The company expects Restaurant NEXT to add approximately $100,000 in annual gross cash flow through a 250-basis-point efficiency gain. McDonald’s plans $8.5 billion of NEXT partnering through 2036, including approximately $5 billion by the end of 2030. Payback is expected at approximately four years for franchisees and five to six years for McDonald’s. New restaurants are expected to contribute about 2.5% to system-wide sales growth in 2026, nearly 2.5% in 2027 and approximately 2% by 2030. McDonald’s targets net unit growth of nearly 4.5% in 2027 and 3.5%-3% annually from 2028 through 2030, with more than 550 U.S. and IOM openings annually through 2030. McDonald’s aims to raise its global franchise mix from approximately 95% to about 98% by the end of 2028. The company targets adjusted operating margin in the low- to mid-50% range and free cash flow conversion in the mid- to high-80% range by 2030, versus the current low- to mid-80% range. It continues to target a 50%-60% EPS dividend payout ratio. Expansion In Chicken & Beverage Category Gold Standard Chicken, covering optimized cook times, fryer settings and oil volumes, is rolling out across the top six markets and is expected to be completed in 2027. McDonald’s plans new McNuggets flavors, sauces and extensions, while expanding McCrispy sandwiches, new-recipe strips, McWings, grilled chicken sandwiches and wraps. The company has hand-breaded chicken expertise across 10,000 restaurants in Asia and is piloting the offering in Chicagoland. McDonald’s plans to expand pilots with advertising in the U.S. and Ireland in 2027 and targets approximately 1.5 percentage points of chicken market-share growth by 2030. McDonald’s plans to expand its beverage platform across most European markets in the first half of 2027 and additional international development licensed markets throughout 2027. The program is expected across most international operated markets by the end of 2026, with further rollout in China, the U.S. and other markets in 2027. McDonald’s targets approximately 1.5 percentage points of beverage market-share growth by 2030. ArchIQ and AI Deployment McDonald’s has deployed Google edge technology across thousands of restaurants in seven major markets and plans to complete the U.S. rollout in 2027. Its restaurant data lake captures billions of daily data points from more than 46,000 restaurants, supporting ArchIQ’s automation, diagnostics, predictive alerts and coaching capabilities. Accuracy Scales help correct approximately 10% of orders before delivery and are deployed in more than 10,000 restaurants, with the footprint expected to double by 2028. ArchIQ also builds on technology used across more than 8,000 restaurants in China through RGM BOSS. Analysts lowered the price forecast for the company following the announcement: TD Cowen analyst Andrew M. Charles maintained a Hold rating and lowered the price forecast from $282 to $270. BTIG analyst Peter Saleh reiterated a Buy rating and slashed the price forecast from $350 to $295. MCD Price Action: McDonald’s shares were up 0.98% at $240.66 at the time of publication on Thursday, according to Benzinga Pro data. Read Also: Fed's Kevin Warsh Says 2% Is 'Firm, Fixed Target,' McDonald’s CEO Sees Years of Elevated Inflation — Peter Schiff Asks ‘Who Do You Believe?’ Photo via Shutterstock