How MCD (McDonald's) Makes Money in 2026: A Deep-Dive With Income Statement

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Understanding how a fast-food restaurant chain like McDonald's makes money is essential for investors and anyone interested in the business of quick-service restaurants. In this post, we break down McDonald's's quarterly income statement (Q4 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 as a global quick-service restaurant chain, primarily through a franchised model where it licenses restaurants to independent operators while managing a smaller portion of company-operated locations. Revenue comes primarily from franchised restaurant royalties and fees, company-operated restaurant sales, and other revenues such as property rents and equipment sales. The business is divided into franchised and company-operated segments, with franchising providing scalable, high-margin income.

Revenue Breakdown

• Total Revenue (Q4 2025): $7.01B (+9.7% YoY)
  • Franchised Restaurant Revenue: $4.31B (61.5% of total)
  • Company-Operated Restaurant Revenue: $2.54B (36.2% of total)
  • Other Revenue by Product: $0.16B (2.3% of total)
  • Growth is powered by strong same-store sales, menu pricing, and global expansion in franchised markets.

Gross Profit and Margins

• Gross Profit: Not directly reported (franchise-heavy model emphasizes operating margins over traditional gross profit).
  • Cost of Revenue: Not specified in available data.
  • McDonald's maintains robust margins due to its asset-light franchising model, where royalties generate high margins without direct food costs.
• Most costs come from company-operated restaurant operations and other expenses.

Operating Income and Expenses

• Operating Income: $3.16B (+10.0% YoY, 45.0% margin)
• Operating Expenses: $1.85B (inferred from revenue less operating income; YoY growth not specified)
  • R&D: Not applicable (minimal in restaurant industry).
  • SG&A: Not broken out; embedded in operating expenses — covers corporate overhead, marketing, and franchise support.
  • McDonald's continues to prioritize innovation while maintaining efficiency through digital ordering, loyalty programs, and supply chain optimizations.

Net Income

• Pre-Tax Income: $2.16B (+-14.7% YoY, 30.9% margin)
• Income Tax: Not specified (effective rate not provided).
• Net Income: $2.16B (+7.3% YoY, 30.9% net margin)
• McDonald's converts a high portion of sales into profit due to franchise scalability, pricing power, and efficient operations.

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What Drives McDonald's Money Machine?

• Franchised Restaurant Revenue: 61.5%+ of revenue / Primarily royalties (typically 4-5% of sales) and fees from over 39,000 franchised locations worldwide, growing 8.9% YoY.
• Digital and Delivery Metrics: Key metric with app orders and partnerships like Uber Eats driving traffic; supports overall 9.7% revenue growth.
• Menu Innovation: Investments in core menu items like McCrispy and value platforms to boost average check.
• International Expansion: Emerging markets growth, though company-operated segments face higher costs.

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 operating income at 45%, with operating expenses (especially other expenses at $0.99B) taking the largest chunk.
• Even after significant other expenses, 30.9% of revenue drops to the bottom line.

Key Takeaways

• McDonald's's money comes overwhelmingly from franchised restaurant royalties
• High gross and net margins illustrate the power of McDonald's's franchise model
• Heavy investment in digital and global expansion, balanced by efficiency in operating costs
• Ongoing growth is driven by pricing, traffic growth, and new market penetration

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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 61.5% of its revenue from Franchised Restaurant Revenue. Additional revenue sources include Company-Operated Restaurant Revenue (36.2%) and Other Revenue (2.3%).

2. How profitable is McDonald's in Q4 2025?

McDonald's reported net income of $2.16B in Q4 2025, with a net margin of approximately 30.9%, reflecting strong profitability driven by high-margin franchising and operational leverage.

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

The biggest expenses on McDonald's income statement are operating expenses, particularly Other expenses at $0.99B in Q4 2025, as McDonald's prioritizes global marketing and restaurant support.

4. Why does company-operated division operate at a lower margin?

Company-operated restaurants, despite generating $2.54B in revenue, contribute lower margins due to direct food, labor, and occupancy costs. McDonald's aggressively invests in these for testing new menus, believing they drive long-term franchise growth—even if less profitable today.

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

McDonald's effective tax rate in Q4 2025 was not specified, consistent with previous years. This moderate rate is primarily due to international operations and tax structuring.