McDonald's (MCD.US) Q3 conference call: CEO admits there is a gap in entry-level value in the US, saying the same store changed in September and is confident that next year will improve
The Zhitong Finance App learned that McDonald's (MCD.US) announced the results for the third quarter of the 2026 fiscal year ahead of the market on November 4. Profits exceeded expectations but revenue was slightly poor, and same-store sales in the US turned negative for the first time in five quarters, which became the focus of this conference. In response to pressure on the US business, Chairman and CEO Chris Kempczinski (Chris Kempczinski) acknowledged that entry-level value supply “has not reached our satisfactory level”, called it “the last piece of the puzzle in our value equation”, and will launch a national entry-level value plan in early 2027; he emphasized that the company “is in the position we expected on Investor Day”, encouraged by the improvement in the US baseline passenger flow trend in September and October, and continues to advance the “McDonald's > NEXT” long-term growth strategy.
In terms of specific financial data, the company's adjusted earnings per share (EPS) for the third quarter was 3.57 US dollars, up 11% year on year, higher than the market's agreed expectations of about 3.38 US dollars; global same-store sales increased by 1.5%, slightly exceeding expectations; however, revenue was about 7.16 billion US dollars, lower than the forecast of about 7.28 billion US dollars, and US same-store sales fell 0.2%, ending the previous five consecutive quarters of positive growth. After the earnings report was released, McDonald's closed up 6.53% to $280.22 during the regular trading session.
Focus and Response
The focus of this conference was how management can make up for the shortcoming of “entry-level value” and reverse the flow of local customers when same-store sales in the US turned negative for the first time in five seasons. This topic is directly related to the market's judgment on McDonald's 2027 recovery path, and it is also the information investors most want to confirm behind the 6.53% single-day stock price surge after the earnings report.
In his opening statement, Kempchinski made it clear that the next focus of the US business “first and foremost” is “the last piece of the puzzle to finalize our value equation—entry-level products.” He acknowledged that the company had previously “not reached our satisfactory level” in this field, adding that this was the key to the US performance falling short of expectations in the second quarter. Management has initiated an eight-week entry-level value plan test covering about 1,900 restaurants, and about 4,000 franchisees have launched similar bundles on their own ahead of schedule; in total, more than 40% of the US system. The company aims to launch a nationwide program in early 2027. Kempchinski said that as the quarter progressed, comparable sales in the US were positive in September (slightly negative values in July and August), and he was “encouraged” by the improvement in the baseline passenger flow trend in September and October.
US Market: Value Strategy Gaps and Inflection Points
Management attributed the 0.2% decline in comparable sales in the US in the third quarter (still +1.4% year to date) to earlier lower price menus than expected. CFO Ian Borden (Ian Borden) said the company reversed the baseline passenger flow trend during the quarter by partially restoring nationwide digital offers and redirecting marketing resources to proven value tools such as “Extra Value Meals (EVM)” (Extra Value Meals, EVM). Kempchinski emphasized that the company is already well positioned in terms of menu board pricing and package combinations, and the real gap lies in entry-level value — especially for low-income consumers. The company currently provides digital benefits to more than 45 million US loyalty members through the app, and plans to increase the frequency of high-frequency users visiting stores with a more clear package of offers.
International market: steady IOM, IDL growth, dragged down by France and Ukraine
Comparable sales in the International Direct Market (IOM) increased by 1.4%, led by Australia and Germany, but France's performance fell short of expectations, and business hours were affected by the escalation of the war in Ukraine, both of which dragged down the overall situation; if these two items are excluded, IOM's performance this season will exceed expectations. Comparable sales in the International Development Authorization Market (IDL) increased 4.2%, with positive growth in all regions. Japan led the rise and achieved positive same-store growth for 44 consecutive quarters; China slowed due to weak macroeconomic and consumption backgrounds, but improved operational efficiency supported a year-on-year increase in profits. Management said it was “maintaining or winning shares” in most major markets.
Beverage Platforms: An Engine for Sustainable Global Growth
The specialty beverage (specialty drink) platform is positioned by management as a platform for sustainable global growth. Boden said that the unit price for customers with specialty drinks is about 50% higher than the average customer order for the whole day, and most unit sales occur after lunch, so the incremental nature is clear. Red Bull Dragonberry Energizer (Red Bull Dragonberry Energizer), launched in August, became the highest-selling single item on the platform during the six-week promotion period, and boosted overall category sales, with minimal encroachment on Refresher's and handmade soft drinks. Currently, nearly 18,000 restaurants in the US, Germany, Canada, and Australia have launched the platform; the company aims to seize an additional 1.5 percent beverage market share by 2030, and plans to expand the platform to more than 7,000 new restaurants in Europe by mid-2027.
McDonald's > NEXT: Transformation, Hand Wrapped Chicken, and Archy
“McDonald's > NEXT” is a multi-year strategy focusing on customer experience and operational efficiency. “Make It Golden” (Make It Golden) was launched in early October, and is called “the largest capacity building initiative in the company's history” by Kempchinski. Key leaders have been trained in the first round, and the goal is to cover more than 18,000 restaurants within the first quarter. At the design level, the company reimagined the restaurant layout and the “Arch IQ” operating platform, and the transformation pace target will rise to more than 5,000 stores per year by 2028 (the first international remodeled stores have already opened in Poland and Spain). Hand-billed chicken (hand-wrapped chicken) has been piloted in the US and Ireland. In early 2027, a full advertising sales test (AST) will be launched at about 100 restaurants in several US cities, and Ireland will be fully promoted nationwide. The intelligent ordering system “Archy” is expanding testing at drive-free restaurants in the US and Australia, with the goal of covering most restaurants in the US by the end of 2027.
Capital Allocation and Guidelines: Refranchising, Capital Expenses, and 2027 Inflation
The company generated nearly $4.2 billion in restaurant profits this quarter, with a year-to-date adjusted operating margin of 48.3%. Capital expenditure is expected to be around US$3.7 billion in 2026 (previously the low end of the range of US$3.7 billion to US$3.9 billion was indicated). In terms of new stores, the number of new stores expected to be opened globally for the whole year was lowered to 2,500 (the original target was 2,600), and the net increase is still around 2,100. Further franchising has progressed steadily. During the year, 175 more restaurants have been franchised with IOM in the US, with the goal of franchising 98% of the world's restaurants by 2028. SG&A's share of system sales was 2% this quarter and is expected to be around 2.2% for the full year. The company expects that foreign currency conversion for the fourth quarter will have no impact on the adjusted EPS (at current exchange rates). Kempchinski suggested that food and packaging inflation in 2027 is still in the middle single digits, higher than historical trends, and pricing needs to balance inflation transmission and value perception.
Other key points
French franchisees recently voted for a simplified market governance structure. Management sees this as a historic step, which is expected to improve operational flexibility and agility, but recent protests have caused short-term disturbances. In the Chinese market, takeout traffic is under pressure due to declining subsidies on third-party takeout platforms, but the global takeout business has maintained medium to high single-digit growth. According to performance release materials disclosed by various media after the results were released, the company also promised to provide franchisees with about 8.5 billion US dollars in rent and capital support to advance the NEXT transformation plan (this figure was not disclosed in the conference call; it comes from external reports in the performance report). Additionally, the company raised its quarterly cash dividend by 4% to $1.93 per share (same source as above; not mentioned in the call recording).
Full Meeting Minutes
McDonald's (MCD) 2026 Third Quarter Earnings Conference Call Transcript
Date: November 4, 2026 (Wednesday)
participants
Vice President of Investor Relations — Dexter Congbalay (Dexter Congbalay)
Chairman and CEO — Chris Kempczinski (Chris Kempczinski)
Chief Financial Officer — Ian Borden (Ian Borden)
Comballe: Good morning and thanks for attending. I'm on the same page today as Chairman and CEO Chris Kempchinski and CFO Ian Boden. Reminder: The performance statement and the forward-looking statement in 8-K apply to today's statement. I'll hand over the baton to Chris first.
Kempchinski: Thanks Dexter and good morning. Today I will first talk about the next steps taken to restore momentum in the US, Ian will detail this season's performance, and finally I will update the progress of “McDonald's > NEXT” throughout the system. In the third quarter, McDonald's achieved comparable global sales of 1.5% and system sales increased by 4% at a constant exchange rate, reflecting the contribution of opening new stores. The international market handed over another steady season, and most major markets continued to excel in execution value, menu, and marketing, even though the consumer environment was still difficult.
US performance improved with the quarter, and comparable sales turned positive in September, before being slightly negative in July and August. This improvement stemmed from a series of interventions we initiated during the quarter: restoring some digital offers to drive high-frequency customer frequency, shifting marketing resources to proven value platforms, and strengthening store-level execution. We were encouraged by the initial response, but it was also clear that there was more work to be done. The focus now is on consolidating improvements and accelerating baseline performance, including three additional interventions in the coming months: first, and most importantly, finalizing the final piece of the value equation — entry-level products; second, activating the most frequent customers through more attractive digital offers; and third, strengthening the flavor and quality credentials that are our greatest assets, including system-wide flavor, quality, and hospitality training.
Regarding the US Value Plan, last week we began an eight-week test of two new affordable daily price menu structures at around 1,900 restaurants across multiple regions, covering the full time period. We test “mix and match bundles” (giving customers more choices and replicating the previous “buy one plus one” familiar ordering behavior), as well as “fixed bundles” (providing established combinations at attractive prices and simplified ordering). Meanwhile, franchisees representing around 4,000 additional restaurants have chosen to launch similar entry-level bundles early. Together, the two surpass 40% of the US system, reflecting a strong consensus on opportunity. We will use the test results to determine which structure is most popular with customers, operates best, and brings sustainable incremental traffic and sales to franchisees. The goal is to launch the new program nationwide in early 2027.
We have achieved significant improvements in overall value, and the value and experience ratings of the top ten markets have increased. Currently, our basic menu prices for the most popular categories such as chicken, beef, and drinks are generally lower than neighboring competitors. Our $5 and $6 packages are still industry standards, and the “Value Package” (EVM) for everyday fan items has become a proven incremental platform. Through our app, we offer a broad portfolio of digital benefits to over 45 million US loyalty members. The goal is clear: Every time customers consider McDonald's, they should see a clear and appealing value proposition — whether it's an affordable single item, a full package, or an in-app digital offer.
All in all, we're in the position we'd expect on Investor Day. We are taking the right steps to improve America's recent performance, and we are encouraged by the baseline passenger flow trends for September and October. At the same time, drinks continued to perform well, contributing to incremental customer order growth. Now hand the ball over to Ian.
BODEN: Thanks Chris and good morning. Global comparable sales increased 1.5% in the third quarter amid a weak consumer environment, particularly in Europe. Despite this environment, we have won or held our share in most top markets.
On the US side, comparable sales fell 0.2% this quarter, and +1.4% year to date. As Chris mentioned, sales improved with the quarter and corrected in September, stemming from measures to stabilize baseline passenger flow during the quarter. One step is to partially restore a wider range of regional and national digital offers to drive the frequency of active members and activate new and lost members. Examples include a $2 breakfast sandwich and free fries when you spend $1. The initial response to these mass digital offers exceeded expectations in terms of incremental traffic and sales, and reversed the downward baseline trend of the second quarter and the beginning of the third quarter. The second step is to redirect marketing resources to “off-peak entry packages” and EVM — proven value tools like these. Since the relaunch of EVM more than a year ago, sales of leading EVM products have been about +7% year over year, and have continued to bring incremental customer traffic, higher average customer orders and profit margins. Nationwide pricing products at the end of the season ($5 Sausage McMuffin with egg package, $8 Big Mac package) continued this trend. The US is also testing additional entry-level value products, which are expected to be launched in early 2027 to complement existing strong value projects.
On the menu side, the new specialty drink platform continued to perform well this season, bringing clear increases with strong repurchases and acceptance. The order that included specialty drinks was about 50% higher than the average all-day average, and most units were sold after lunch. The Red Bull Dragon Berry Energy Drink, which was added in August, brought a boost to the platform and minimized the consumption of Refresher's and handmade soft drinks; within the six-week advertising window, it became the highest-selling single item on the platform and boosted overall specialty drink category sales.
Comparable sales in the International Direct Market (IOM) increased by 1.4%, with Australia and Germany leading the way, with most top markets winning or retaining their share; IOM growth slowed slightly from the second quarter, mainly reflecting France's continued failure to meet expectations and the impact of the escalation of the war in Ukraine on business hours. Excluding these two, IOM's performance this season will exceed expectations. In terms of value, Australia expands the new pricing tier of the McSmart platform; Germany and the UK strengthen family-friendly affordable platforms. In terms of menu innovation, Australia's launch of specialty drinks in July far exceeded expectations; the launch of Red Bull Energy Drink in Canada exceeded unit sales forecasts; Germany launched the first limited-time specialty drink, Italo Spritz. The performance of the US, Canada, Germany, and Australia has strengthened our confidence that specialty drinks can become a sustainable global growth platform under “McDonald's > NEXT” and help seize an additional 1.5 percent share of the beverage market by 2030. We are still on schedule to expand specialty drinks to almost all European markets by mid-2027, and advance in more international development authorized markets (LDL).
Another global growth platform, “Big Beef Burger”, is also gaining momentum: Australia's Quarter Pounder innovation exceeds expectations; Germany's Big Arch platform continues to be strong; and the UK and Spain are also launching Big Arch. In terms of marketing, “Menu Heist” introduced international menus on a global scale. Sales and customer flow in Germany and Canada were strong. Germany recorded one of the highest sales weeks in market history; the UK went online at the end of September, and early social media trends showed strong customer excitement. Most IOM markets performed well, but France continued to fall short of expectations, which Chris will discuss later.
Comparable sales in the International Development Authorization Market (IDL) increased 4.2%, and growth is positive in all regions. Japan led the way and has achieved 44 consecutive quarters of positive same-store growth; IDL growth was dragged down by China's weak macro and consumption, but improved operating efficiency of the Chinese team supported a year-on-year increase in profits.
In terms of corporate profit and loss, the adjusted EPS was 3.57 US dollars (including 0.01 US dollars in foreign currency conversion headwinds); according to the constant exchange rate, the adjusted EPS increased 11% year on year. According to the current exchange rate, we expect foreign currency conversion in the fourth quarter to have no impact on the adjusted EPS (direction guidance, exchange rate or changes). The third quarter generated nearly $4.2 billion in restaurant profits; the year-to-date adjusted operating margin was 48.3%, reflecting higher other revenue (including higher restaurant sales revenue from further franchising). We are steadily advancing our goal of licensing 98% of the world's restaurants by 2028. We have already licensed 175 more restaurants in the US with IOM during the year. SG&A's share of system sales was 2% this quarter and is expected to be around 2.2% for the full year. As stated on Investor Day, our investment in global systems, sharing capabilities and high-quality corporate data is expected to improve SG&A share efficiency from 2027.
In terms of new stores, we maintain discipline. The number of global openings for the whole year was lowered to 2,500 (the original target was 2,600), and the net increase is still around 2,100. Capital expenditure is expected to be around US$3.7 billion in 2026 (previously guiding the low end of US$3.7 billion to US$3.9 billion), reflecting a slight decrease in the opening of its own market and exchange rate effects. Overall, the results for the third quarter are in line with the trajectory we have previously outlined for the US business, and most international markets continue to be stable. We are encouraged by the improvement in the US baseline trend during the quarter, and focus on stronger, more consistent performance in 2027. Meanwhile, we will continue to invest in “McDonald's > NEXT” on a large scale. Now hand the ball over to Chris.
Kempchinski: Regarding France, a few weeks ago, French franchisees voted for a clear and holistic path forward, including simplifying the market governance structure to improve flexibility and agility. This is a historic vote, and I thank the franchisees for their cooperation. Despite short-term disruptions caused by recent protests, we are now better placed to drive growth with stronger marketing support and the right mix of innovation, value, and execution.
We detailed “McDonald's > NEXT” on Chicago Investor Day six weeks ago. Its core is to improve the customer experience while making restaurants easier to operate and more efficient. Our ambition is simple: to be the first choice more often chosen by more customers. Franchisees, suppliers and employees across the system are actively taking action and exchanging ideas.” “NEXT IS NOW” is our internal slogan. On Founder's Day in early October (Ray Kroc's birthday), we launched “Operation Golden Label” — the largest capacity building initiative in history, focusing on delicious food and McDonald's unique hospitality. The first round of training for key leaders has been completed in the first month, and the goal is to cover more than 18,000 restaurants in the first quarter.
The beverage platform is also progressing well. Nearly 18,000 restaurants in the US, Germany, Canada, and Australia are creating growth, and plans to expand more than 7,000 more in Europe by mid-2027. Hand-wrapped chicken has already started pilot operations in the US and Ireland; in early 2027, about 100 restaurants in several US cities will launch full advertising sales tests, and Ireland will be fully promoted nationwide. The remodeled NEXT restaurant has already opened around the world. The first international store opened in Poland and then Spain a few weeks ago; we are progressing at the global pace of transforming hundreds of American restaurants in 2027 and reaching more than 5,000 restaurants a year by 2028. We are also expanding drive-free testing of the “Archy” smart ordering system in the US and Australia, with the goal of covering most US restaurants by the end of 2027. This is where NEXT landed.
Q & A session
Morgan Stanley Brian Harbour (Brian Harbour): Regarding recent conversations with franchisees — is there a consensus on US values and is this the main driver in early 2027? Second, with regard to NEXT, are they accepting the required investments and timelines disclosed in September, and are there any updates?
Kempchinski: In terms of value, I have a strong consensus on focusing on “entry-level value” as the last piece of the puzzle to be solved in our value equation — this is why about 40% of the US system is already working on some version of the entry-level value plan (some tests, some franchisees, etc., test results have already been launched first). Value Other aspects We are in good condition. At NEXT, there are many conversations with franchisees, but in general, they agree 100% on improving the customer experience, flavor quality and hospitality, and 100% agree on making restaurants easier to operate and more efficient. Our system is always discussing “how to do it”. Taking transformation as an example, there are teams in the US who go through the renovation list one by one and will surely find optimization opportunities. We expect to finally reach a renovation plan that satisfies all parties. In terms of hand-wrapped chicken, we set up AST tests in two cities in early 2027; last week I met with franchisees in Ireland to prepare hand wraps. Overall, I feel good about the franchisee's status at NEXT. They are properly cutting into “how to do it”, and we will continue to share progress in 2027.
UBS Dennis Geiger (Dennis Geiger): US trends have improved after the intervention. Can you talk about the US sales trajectory for the rest of the year and high-level views on 2027 (the benefits of intervention and NEXT)?
Boden: Back to what we said in the second quarter call — what we did and what we saw in the third quarter confirmed the path we outlined at the time: focus on putting the US in a stronger position by the end of 2026. We feel good about the collective implementation of the US system, are encouraged by the improvement in the baseline passenger flow trend in September and October, and are very confident that the US will exit in a stronger position at the end of 2026. On the IOM side, most large international market economies hold or win shares. The environment is weak, but we are doing well. Looking ahead to Q4, we expect the conditions seen in the third quarter to be broadly consistent throughout the year.
John Ivankoe (John Ivankoe), J.P. Morgan Chase: I was impressed by all the stores that have hand wrapped chicken. The question is, should the hand-wrapped chicken platform focus more on major upgrades such as sandwiches and strip-shaped products rather than entering the higher-risk category of bone-in chicken wings (see Mighty Wings's experience ten years ago)?
Kempchinski: These are all details we have dug deep into with our franchisees. Last week in Ireland, about 10 of our restaurants compared the two “strips+sandwiches” to the trifecta of “strips+sandwich+chicken wings”. Early days (only 10) showed that chicken wings brought strong increases, but it's still early. What we need to learn is whether the operational complexity of the three outweighs their incremental benefits. Boden: We have done a lot of “menu architecture” research, which is ultimately led by customer needs; our success in many markets around the world is indeed an area of opportunity.
Bank of America Sara Senatore (Sara Senatore): Clarification on the model and “Operation Gold Standard” - are you changing the metrics that measure franchisees (PACE indicators are known)? Second, what is IOM's opinion on the impact of healthy re-franchise earnings on rents and royalties?
Kempchinski: Our focus is on how to evaluate flavor and quality, which is the focus of system upgrades.” The most notable change in the “Gold Standard Campaign” training was to strengthen the customer feedback process: food safety and employee-related evaluations remained the same, but we introduced a new customer satisfaction assessment method in the US in Q4 and went global; at the end of Q4, we will allow customers to directly evaluate the experience within the app. The quality of flavor is ultimately determined by customer perception, and we are greatly improving the visibility and accuracy of feedback. Boden: Earnings have risen this year, as part of NEXT's 98% franchise by 2028; the US and IOM have contracted 175 more franchises since 2026, and the activity is expected to continue in the next few years. In terms of the model, it affects revenue (this is also one reason why Q3 revenue declined slightly, as 100% of revenue was converted to royalty contribution revenue). We are very confident about the path to reach 98% by 2028.
TD Cowen Andrew Charles (Andrew Charles): Ian, confirm - do you think Q4 US stores will be better than Q3? Chris, in the past, you have quantified the support of US franchisees for the initiative (such as EVM reshaping in September last year). What is the current level of support for NEXT investment?
Boden: I didn't say Q4 would be better at the same store in the US. I'm talking about being encouraged by the improvement in baseline trends in September and October, and that we are on a consistent path of “putting America in a stronger position by the end of 2026.”
Kempchinski: The support provided by NEXT varies from country to country; the US Owner-Operators and Skye are refining the composition of capital and rent. The partnership plan has not yet been finalized, but the overall investment framework disclosed on Investor Day remains unchanged.
Evercore Dave Palmer (Dave Palmer): Regarding the US same-store outlook and listing method - “Operation Gold Standard” and value testing shows that you are adjusting your listing method. The listing of chicken in 2025 and the “rework” after this year's value change made investors worry about franchisee alignment and hit rates. What changes have you made, and why do you think the hit rate will increase in the future?
Kempchinski: This is something you and I have been talking about. Our listing method includes testing. The key is the balance between “one-way doors” and “two-way doors” — important irreversible decisions must be made right, and we are extremely strict about the testing time, number of restaurants, etc. (NEXT takes this path for multiple elements). There are areas where we are ready to advance directly based on our global experience. For example, a year ago we did EVM without testing it, and it was proven correct afterwards. The US is currently testing various ideas about entry-level value, but the consensus is that “focus on entry-level value” is the final gap. We always communicate with franchisees. There is no one-size-fits-all; the focus is on the scale and durability of decisions.
Bernstein Danilo Gargiulo (Danilo Gargiulo): Clarification — How much impact did the current protests have on the results (there are rising protests in IOM's main markets)? The real question is IOM: It's encouraging that you have maintained or gained a share in most IOM markets, but macroeconomic pressure is increasing and CPI is high in some countries. Do you expect IOM to still be in the same store next year? How much is controllable and uncontrollable?
Kempchinski: There are indeed many developments in Europe. In our review, we specifically pointed out the drag on the French and Ukrainian markets. Both countries have major external issues, and we expect the impact to continue at least until Q4, and we hope to improve in 2027. At the macro level, Europe is indeed weak, but our focus has always been on gaining share — holding or winning share in most markets, which is the basis for our 2027 layout.
Boden: Added that most of the top IOM markets had consistent results, indicating that they are implementing the script and the script is working; it is France that needs to be solved. The French governance vote is a major step forward. It will improve operational efficiency and agility, and help us implement the right plan for 2027.
BTIG Peter Saleh (Peter Saleh): Can you elaborate on the eight-week value test, what you've seen so far, how to measure success, and why EVM discounts aren't enough and need to go further?
Kempchinski: Testing only started last week, so it's too early to talk about the results in a week. We will measure it by incrementality and whether it can drive incremental sales (ultimately driving the franchisee economy) and look at acceptance. As to why EVM isn't enough, back to the three elements of value: menu board price (we're already in a good position), package combinations (EVM and the 5/6 dollar package put us in a good position), and good entry-level value — low income consumers in particular need strong entry-level value, and we “haven't reached a satisfactory level” until now. We didn't do well in the second quarter. This is exactly what the current test needs to solve; it is expected that there will be answers in early 2027, and the full set of values will be ready at that time. Boden: The three elements of the IOM market are complete and have been proven over a long period of time. It is one of the basic drivers for its consistent and positive share. Value is the core component.
Citibank Jon Tower (Jon Tower): Dive deep into the US beverage platform—what kind of customers have you attracted and where did they come from? The afternoon session performed well and did not encroach on existing specialty platforms, but will it eat away at other drinks on the menu? Will the future require “new wheels” to spin faster than the basic menu?
Boden: We've seen very consistent results in every deployed market, so we believe this is a multi-year growth platform and can reach the 1.5% share gain set on Investor Day. Specifically, in the US, more than half of the consumption scenarios confirmed incremental attributes after lunch, when restaurants were free; customer orders containing drinks were about 50% higher than the average for the whole day, and food included was strong. The customer base is young, which is suitable for key consumers in the category. New product news is of course important (Germany's Aperol Spritz performed best this season), but we put the basic layer of “delicious, high quality, everyday choice, and cost-effective” first, and then moderately rotate new products. Cannibalism is inevitable, but the focus is on clear increment—drinks bring incremental sales to stores and, in other words, incremental profits.
Kempchinski: Adding to that, in the long run, we really need to provide a richer beverage matrix; one of the biggest investments in NEXT's transformation is to expand the “beverage cell” (beverage cell) backstage space to support a richer beverage lineup in the future.
Jeffrey Andy Barish (Andy Barish): Your marketing advantage is remarkable, but the message delivery doesn't seem to “cut through” (cut through). What changes have been made in channels and message delivery?
Kempchinski: We agree that marketing falls short of McDonald's standards; this is exactly what Skye and the team are working on; on Investor Day, we talked about “Consumer > NEXT” and changes in demand generation methods, emphasizing that McDonald's, as one of the world's largest brands, can generate “topical value” that is difficult for others to reach, and we haven't fully released it before to drive brand love, and you'll see us do this more and more over the next few years.
Baird (Baird) Chris O'Cull (Chris O'Cull): How is the pricing alignment with franchisees on the full menu (not just advertising value)? Also, you said that the Q4 system will be priced in the middle of a single digit; are you still planning to do this?
Kempchinski: We always discuss pricing with franchisees. The US is good overall except for entry-level value — basic menu pricing is generally discounted compared to competitors in the trading area, and we are satisfied with this; mid-single-digit food and packaging inflation (higher than history) is still expected in 2027, so we need to carefully balance inflation transmission and value leadership.
Oppenheimer Brian Bittner (Brian Bittner): You mentioned resuming national digital offers to fix baseline sales. Can you explain the size of their business or the impact on time? Also, what is the recent status of low-income consumers (some peers say this group has improved for the first time in the year)?
Boden: Digital offers are critical to our high-frequency users and loyalty members. American loyalty members already account for nearly 30% of the customer base and are an important part of it; the frequency of members increased by about 2.5 times in the 12 months after joining. It's important to connect with these customers and provide clear and attractive offers; we've made progress but there's still work to be done. Kempchinski: Digital offers are important because they target the most frequent customers — about one-third of sales are digital sales, of which apps (that is, members) account for the majority; high-frequency customers contribute most sales and are extremely sensitive to digital offers. Previously, adjusting key digital discount elements hurt high-frequency customers. Skye and the team have made up for the main gap and continue discussions with franchisees on how to better reward high-frequency customers.
Guggenheim Greg Francfort (Greg Francfort): Can we talk about takeout? China's weakness this season is partly due to the withdrawal of aggregation platforms. How is the takeout experience in the US and key IOM markets, and is it still growing?
Kempchinski: There is indeed a sharp decline in third parties in China — there was an anomaly where takeout was cheaper than in-store delivery (requiring large subsidies), but now it has reversed, dragging down traffic in China and the wider market, and we are also affected. However, global takeout is still growing (medium to high single digits). Relying on store density and location advantages, McDonald's is the preferred partner brand for takeout platforms, and the takeout share continues to increase; under pressure from the cost of living, we and the platform need to treat surcharges carefully. Takeout is still growing widely as a whole.
KeyBanc Chris Carril (Chris Carril): How is the cash flow from single store operations this year compared to the $500,000 level mentioned on Investor Day? In terms of cost outlook, you mentioned mid-single digit food and packaging inflation in 2027. How will this affect value initiative conversations with franchisees?
Kempchinski: In the pricing conversation, US leadership franchisees have already discussed this at headquarters this week, and there is broad consensus on the “correct value solution for environmental co-value”. This is the original purpose of entry-level value testing. The promise is unwavering; the rest is “how to do it”. Mid-single digit inflation in 2027 requires us to be agile and have a clearer understanding of the pricing of key value items through the RGM team. In terms of cash flow, I don't have the latest figures, but they are generally in line with what we said, around 500,000, which is ultimately affected by Q4.
Boden: In addition, the most important thing that drives franchisees and our own bottom line is to return business momentum to where we want; the US system is focusing on this, and the 2027 plan is being further developed, and the focus is on the strongest top-level growth in the environment.
Concluding remarks Komballe: Thank you, this concludes the Q&A. For follow-up questions, please contact McDonald's IR or myself by email. Moderator: This is the end of the McDonald's investor call. You can disconnect.