McDonald's $5B NEXT Support Plan Leans on Rent Relief, Not Remodel Cash

Capital support is a small part of the roughly $5 billion promised through 2030. Franchisees will fund most of the remodels, and McDonald's will pay its share mainly by giving up rent.

McDonald's shares fell about 4% on the morning of September 23 and were down about 5% later, according to 24/7 Wall St. and Reuters. At its investor day, the company had put a price on its NEXT strategy. The S&P 500 was down about 0.65%, and Wendy's, Yum Brands and the Invesco food and beverage ETF each moved 1% or less. The selling was specific to McDonald's.

The headline commitment is about $8.5 billion of "partnering support" to franchisees through 2036, with roughly $5 billion of it by 2030, delivered through rent relief and capital support. In return, McDonald's targets about 250 basis points of gross restaurant-level efficiency by 2030. It says that is worth about $100,000 of extra annual cash flow for the average US restaurant, and that franchisees should recover their investment in about four years.

One disclosure on the day matters more than the headline. According to Yahoo Finance's account of the targets, McDonald's put "cumulative capital partnering support" at $1.5 billion to $2 billion over 2027 to 2030, alongside baseline capital spending of about $3 billion a year. If that is the capital part of the roughly $5 billion through 2030, the rest, about $3 billion to $3.5 billion, is rent relief. That split is a CTOL inference from the two figures. McDonald's has not published the breakdown in those terms.

Who pays for the remodel

Start with the store. If 250 basis points equals $100,000, the average US restaurant does about $4 million in annual sales ($100,000 divided by 2.5%). If that $100,000 is the steady-state cash flow behind a simple four-year payback, the franchisee's net investment is roughly $400,000 per restaurant.

Now the capital support. McDonald's had 13,706 US restaurants at the end of 2025, about 95% of them franchised, or roughly 13,000. The efficiency and payback figures are quoted for US restaurants, but McDonald's has not given a geographic split for the support. If the $1.5 billion to $2 billion of capital went entirely to US franchisees, it would be about $115,000 to $155,000 per restaurant. On that assumption, a typical NEXT upgrade costs about $515,000 to $555,000, and McDonald's pays roughly a fifth to just over a quarter of it directly. Any share going abroad would push the US figure lower.

That is well below the last big remodel cycle. Under the Experience of the Future program, McDonald's paid 55% of remodel costs for US restaurants completed by 2020 and 40% for those finished in 2021 and 2022, Nation's Restaurant News reported in November 2018. Those remodels cost between $160,000 and about $750,000 depending on scope. The slower, cheaper schedule came after open tension with franchisees over the cost.

Rent relief fills the gap, and it is not the same thing. A rent cut lifts the operator's cash flow every month whether or not the remodel pays off. It also costs McDonald's revenue from its highest-margin line rather than capital spending. Spread across all US franchised restaurants, $3 billion to $3.5 billion of relief is about $230,000 to $270,000 per restaurant through 2030. Combined with the capital support, total company help comes to about $380,000 per restaurant, close to the franchisee's implied $400,000. By that broader measure, McDonald's funds about half of NEXT. But most of its half arrives as foregone rent, not as money toward the build.

What the rent costs the income statement

US franchised revenues, mostly rent and royalties, were $7.37 billion in 2025 and grew 2% that year. Global franchised revenues were $16.5 billion. Spread over the four and a quarter years from late 2026 to the end of 2030, $3 billion to $3.5 billion of rent relief is roughly $0.7 billion to $0.8 billion a year. That is around 10% to 11% of US franchised revenue if all of it lands there.

That sits awkwardly beside the margin target. McDonald's expects operating margin to reach the low-to-mid 50% range by 2030, up from a 46.9% adjusted margin in 2025. On the 2025 base of $26.9 billion of revenue and $12.4 billion of operating income, taking out $0.8 billion a year lowers reported margin from about 46% to about 44%. Getting from there to 52% or more needs faster royalty growth from higher sales, new units and cost control above the restaurant.

Management has said where it expects that growth. New restaurants should add nearly 2.5 percentage points to systemwide sales growth in 2027 and about 2 points by 2030. McDonald's also wants to gain 1.5 percentage points of global market share in both chicken and beverages by 2030 while defending its lead in beef. Reuters reported that the company expects customer traffic in key markets to stay flat while inflation remains elevated, and that is the problem. The rent is given up now, while the traffic that would replace it is not yet in the forecast.

Whether the $100,000 is real

The 250 basis points are gross restaurant-level efficiency, partly tied to ArchIQ, an AI system McDonald's plans to deploy in the US and its international operated markets. Where the savings come from decides whether they last. Throughput, waste, scheduling and digital ordering gains should persist. Savings from thinner staffing or deferred maintenance can be lost to slower service or handed back to customers in price. A franchisee who cuts $100,000 of cost but loses traffic gets neither the payback nor the royalty growth McDonald's is counting on.

The rent-heavy design also changes the incentives. Rent relief rewards operators whether or not they hit the efficiency target. Capital support rewards only the remodel. McDonald's has chosen a mix that eases franchisee cash flow but makes the parent's return depend on sales growth it has told investors not to expect soon.

CTOL view: We think rent relief will visibly shrink McDonald's highest-margin revenue line before the efficiency gains show up. Our call: US franchised revenues for 2027, as reported in McDonald's 2027 Form 10-K (due by early March 2028), will be lower than the 2026 figure in the same filing. We are wrong if 2027 US franchised revenues are equal to or higher than 2026's. The reasoning: rent relief of roughly $0.7 billion to $0.8 billion a year against a $7.4 billion base that grew only 2% in 2025, and management's own expectation of flat traffic.

McDonald's $5B NEXT Support Plan Leans on Rent Relief, Not Remodel Cash

Who pays for the remodel

What the rent costs the income statement

Whether the $100,000 is real

Sources

You May Also Like

Subscribe to our Newsletter