Company DCF analysis file
McDonald’s DCF Analysis
McDonald’s DCF must value corporate receipts after the costs and investment supporting its ownership mix. Systemwide restaurant sales are not corporate revenue. Separate franchised income, operated-store contribution and parent overhead, then reconcile cash and property obligations before discounting an assumed investor cash stream.
Read parent revenue together with restaurant and corporate costs
Years ended December 31, 2024 and 2025; consolidated corporate income, $ millions. Amounts are $ millions unless a caption specifies otherwise. Source: annual financial statements. Reported lines retain the issuer’s scope; derived ratios use the displayed denominators.
| Measure | FY2024 | FY2025 |
|---|---|---|
| Corporate revenue | 25,920 | 26,885 |
| Franchise occupancy costs | 2,536 | 2,618 |
| Operated-store food / payroll / occupancy costs: sum | 8,335 | 8,269 |
| Other restaurant costs | 339 | 564 |
| SG&A including its D&A: sum | 2,859 | 3,040 |
| Other operating (income) expense, net | 139 | 2 |
| Total operating costs: issuer total | 14,208 | 14,492 |
| Operating income | 11,712 | 12,393 |
| Net income | 8,223 | 8,563 |
| Operating margin: derived | 45.2% | 46.1% |
Reported totals are retained: rounded component lines can differ from their sum by $1 million. The operated-store cost grouping adds food and paper, payroll and benefits, and occupancy/other costs; SG&A combines its separately displayed depreciation and other expenses. These presentation groups do not allocate parent cash to individual franchisees.
A change in franchise ownership mix can alter the reported revenue denominator even when restaurant demand has not changed in the same way. Build openings, closures and refranchising into the operating case before comparing consolidated margins. Do not treat a reduction in reported operated-store sales as automatic evidence of weaker system sales.
Separate restaurant contribution from corporate operating profit
Source: annual corporate income statement. The following contributions are derived before corporate SG&A and other group items, not reported segment profit or cash flow.
| Population | Revenue | Selected direct cost | Derived contribution |
|---|---|---|---|
| Franchised | 16,548 | 2,618 | 13,930 |
| Company operated | 9,690 | 8,269 | 1,421 |
| Other | 647 | 564 | 83 |
The franchise row measures the parent’s revenue after displayed occupancy expense; it is not the franchisee’s restaurant margin. Operators still fund their own cost base. Test guest demand and operator funding capacity alongside parent rent and royalty assumptions, rather than applying the parent’s margin to systemwide sales.
Trace earnings into cash and reinvestment
Reconciliation source: annual earnings and cash-flow statements. Subtotals below are checkpoints, not extra amounts to add. Grouped adjustments are calculated from the disclosed cash-flow lines.
| Step | FY2025 |
|---|---|
| Operating income | 12,393 |
| Financing / nonoperating / tax bridge including rounding | -3,830 |
| Net income: subtotal | 8,563 |
| Depreciation / amortization | 2,199 |
| Other non-cash / reconciliation | -317 |
| Working-capital items | 106 |
| Operating cash: subtotal | 10,551 |
| Capital expenditures | -3,365 |
| After capex: derived | 7,186 |
The reported earnings bridge includes a $1 million presentation-rounding difference. Other reconciliation combines deferred tax, stock compensation, asset-sale gains and the statement’s other line. The working-capital group combines receivables, inventory/prepaids, payables, income taxes and other accrued liabilities; it is distinct from the cash cost of new restaurants.
Cash after capex precedes additional business purchases and other investing or financing movements. Use a separate schedule for new sites, reinvestment and refranchising proceeds. Historical depreciation is not a quotation for the future replacement cost of a restaurant or property commitment.
Test franchise receipts against fixed parent occupancy costs
Illustration: change the historical franchised-revenue basis by 1% in either direction while holding the displayed parent occupancy cost fixed. This is a receipt-and-cost sensitivity, not a systemwide sales forecast or a change in contractual royalty terms.
| Case | Franchise revenue | Occupancy cost fixed | Contribution |
|---|---|---|---|
| 1% lower receipts | 16,382.5 | 2,618 | 13,764.5 |
| Historical basis | 16,548 | 2,618 | 13,930 |
| 1% higher receipts | 16,713.5 | 2,618 | 14,095.5 |
The exact change before display rounding is $165.48 million of pre-tax contribution. It is not an equal change in shareholder cash: taxes, collections, corporate support and reinvestment still need to follow the case. A weak operator can face tighter funding even when a parent contract includes minimum payments; test collection and reinvestment capacity explicitly.
Keep interim reporting separate from the annual basis
Q2 2026 covers 2026-04-01 through 2026-06-30 and was released 2026-08-04. Revenue was $7,099 million in this quarter. Source: official Q2 2026 results.
The quarter remains separate from the complete annual basis. Corporate revenue and systemwide sales retain different populations, while property and lease cash continue on their own schedules. Do not annualize the quarter’s revenue and label the result normalized franchise cash flow.
Turn the financial basis into a DCF case
| Decision | Treatment |
|---|---|
| Revenue | Model parent rent, royalties, initial fees, operated stores and other revenue within their disclosed populations. |
| Contribution | Keep operator economics separate from parent franchise contribution and corporate overhead. |
| Property and leases | Choose a consistent lease convention; do not remove rent cash and deduct the same claim again without adjustment. |
| Investment | Distinguish new sites, reinvestment, business purchases and refranchising proceeds; identify who funds each. |
| Enterprise and equity | Use explicit operating tax and terminal investment assumptions, then reconcile valuation-date debt, cash, leases and dilution. |
A conventional enterprise bridge starts from operating income after assumed operating tax, adds appropriate non-cash allocations and deducts capital investment and operating-balance changes. A franchise-heavy mix does not make the parent’s property or technology support cost disappear. Match the resulting cash definition to the discount rate and document how the terminal ownership mix funds ongoing investment.
The McDonald’s company analysis explains the wider operating context. Use the company forecast tool and DCF calculator with explicit assumptions. Use the historical financials to define an explicit operating and reinvestment case, then supply valuation-date capital costs, claims and diluted shares. Check that each cash claim is counted once before deriving a per-share value.
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