How MCD (McDonald's) Makes Money in 2025: A Deep-Dive With Income Statement

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Understanding how a global quick-service restaurant leader like McDonald's makes money is essential for investors and anyone interested in the business of fast food and franchising. In this post, we break down McDonald's quarterly income statement (Q2 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick McDonald's Overview

McDonald's operates one of the world's largest fast-food restaurant chains, serving over 100 countries with a mix of company-operated and franchised locations. Revenue comes primarily from franchised restaurant fees and rent, as well as sales from company-operated restaurants. The business is structured around two main segments: Franchised Restaurants (the majority of locations) and Company-Operated Restaurants (directly managed by McDonald's), with a small but fast-growing "Other Revenue" category.

Revenue Breakdown

• Total Revenue (Q2 2025): $6.84B (+5.4% YoY)
  • Franchised Restaurant Revenue: $4.21B (61.6% of total, +6.9% YoY)
  • Company-Operated Restaurant Revenue: $2.46B (35.9% of total, -0.1% YoY)
  • Other Revenue by Product: $0.17B (2.5% of total, +93.3% YoY)
• Growth is powered by expansion of the franchised model, menu innovation, and strong international performance.

Gross Profit and Margins

• Gross Profit: $3.96B (57.9% gross margin)
  • Cost of Revenue: $2.88B (+2.7% YoY)
  • McDonald's maintains robust margins due to its asset-light franchising model and operational efficiencies.
• Most costs come from food and packaging, labor at company-operated stores, and occupancy expenses.

Operating Income and Expenses

• Operating Income: $3.23B (+6.1% YoY, 47.2% margin)
• Operating Expenses: $0.73B (+13.9% YoY)
  • R&D: Not separately disclosed; typically included in SG&A for McDonald's.
  • SG&A: $0.60B (-7.2% YoY, 8.7% of revenue) — covers global corporate overhead, marketing, and administrative costs.
  • McDonald's continues to invest in digital innovation and marketing while maintaining strict cost discipline.

Net Income

• Pre-Tax Income: $2.86B (+12.0% YoY, 41.8% margin)
• Income Tax: $0.61B (21.3% effective tax rate)
• Net Income: $2.25B (+11.4% YoY, 32.9% net margin)
• McDonald's converts a significant portion of sales into profit due to its scalable franchise model and global brand strength.

What Drives McDonald's Money Machine?

• Franchised Restaurant Revenue: 61.6% of revenue, driven by royalty fees and rent from franchisees.
• Same-Store Sales Growth: Global comparable sales growth, especially in international markets, underpins revenue expansion.
• Digital and Delivery Investment: Strategic focus on digital ordering, loyalty programs, and delivery partnerships to capture evolving consumer demand.
• Future Growth Areas: Expansion into new markets and digital channels, though these investments are not yet fully reflected in profitability.

Visualizing McDonald's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially SG&A) taking the largest chunk after cost of revenue.
• Even after significant investments in marketing and technology, 32.9% of revenue drops to the bottom line.

Key Takeaways

• McDonald's money comes overwhelmingly from franchised restaurant revenue.
• High gross and net margins illustrate the power of McDonald's asset-light, franchise-driven business model.
• Heavy investment in digital and marketing, balanced by efficiency in operating costs.
• Ongoing growth is driven by international expansion, menu innovation, and digital transformation.

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FAQ About McDonald's Income Statement

1. What is the main source of McDonald's revenue in 2025?

McDonald's generates over 61% of its revenue from franchised restaurant operations. Additional revenue comes from company-operated restaurants 36% and a fast-growing "Other Revenue" segment 2.5%.

2. How profitable is McDonald's in Q2 2025?

McDonald's reported net income of $2.25B in Q2 2025, with a net margin of approximately 32.9%, reflecting strong profitability driven by its franchise model and operational efficiency.

3. What are the largest expense categories for McDonald's?

The biggest expenses on McDonald's income statement are cost of revenue (primarily food, labor, and occupancy at company-operated stores) and operating expenses, particularly SG&A, which reached $595M in Q2 2025 as McDonald's prioritizes digital innovation and global marketing.

4. Why does Company-Operated Restaurants segment operate at a lower margin?

Company-Operated Restaurants, despite generating $2.46B in revenue, face higher direct costs and posted lower margins in Q2 2025. This is because McDonald's aggressively invests in operational improvements and employee experience, believing these will drive long-term growth—even if the segment is less profitable today.

5. How does McDonald's effective tax rate compare to previous years?

McDonald's effective tax rate in Q2 2025 was 21.3%, consistent with previous years. This moderate rate is primarily due to international structuring and tax benefits from share-based compensation.