McDonald's stock falls as it unveils plan to spend big on restaurant upgrades

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McDonald's on Wednesday announced plans for its own media network, pricey restaurant upgrades and ways to win over GLP-1 users during an investor presentation at its Chicago headquarters.
In June, the company unveiled its newest growth strategy, McDonald's > NEXT. The pillars of the plan include a new restaurant design, better-tasting food and drinks, consumer-led innovation, and improved hospitality from employees. But until Wednesday, executives had offered few details about how they would implement the plan and how it may affect its financial results over the coming years.
The shifts come as McDonald's U.S. business tries to rebound from sluggish sales and as consumers hit by years of elevated inflation visit restaurants less often. The chain aims to win over more diners at a time the company expects inflation and flat traffic to restaurants overall will persist, CEO Chris Kempczinski told CNBC.
The plan and Kempczinski's comments did not impress Wall Street, as McDonald's shares fell 6% in afternoon trading.
A key part of the strategy is restaurant remodels, which McDonald's mandates roughly every decade for franchisees. The new design features updated PlayPlaces, which were previously being phased out, and more open kitchen layouts. Customers will be able to see their McCafe drinks being prepared.
But the chain will also unveil what it calls Restaurant > NEXT, which includes improvements to equipment, technology and operations. It also will feature "ArchIQ," an artificial intelligence-powered operating system for restaurants. The company said "Archy" can take orders in English and Spanish from customers, saving about 50 labor hours per week, while other elements of ArchIQ can manage inventory and schedule shifts, as well as use scales to assess order accuracy.
"Capabilities such as AI-enabled revenue management and Archy's suggestive sell will help increased average check over time," CFO Ian Borden said.
McDonald's invests in restaurants
All of those upgrades will require steep investment from franchisees. But McDonald's is also planning to provide financial support, through rent relief and actual capital. Through 2036, McDonald's plans to spend as much as $8.5 billion to accelerate franchisees' investment in the restaurant improvement plan.
About $5 billion of that support will happen through 2030. McDonald's is projecting about $1.5 billion to $2 billion in capital spending from 2027 through 2030 to accelerate NEXT, in addition to about $3 billion every year on typical capital expenditures. (In 2025, McDonald's reported $3.4 billion in capital expenditures.)
A standard lobby remodel of a drive-thru restaurant in the U.S. typically costs about $400,000 to $450,000, paid for by the franchisee. The additional investments tied to the plan will be "incremental" to the remodel expenses and cost roughly $800,000 per restaurant, although McDonald's will be providing financial support for some of that, according to Borden. Those investments will be phased, with tech, kitchen and operational upgrades adopted over time as they become available.
Franchisees may protest the franchisor's expectations for their own investment in the restaurants, on top of standard cosmetic remodels. Beef and labor costs are already weighing on their profits.
"We'll get good returns," Kempczinski told CNBC. "Now that doesn't mean to say that there aren't going to be a lot of anxieties, a lot of questions, as there always is around investment. It happens every time we go into one of these cycles, and we'll work with our franchisees collaboratively on that to address their questions."
Kempczinski added that the company is projecting franchisee returns in the mid-to-high 20% range, while corporate returns will be in the high teens.
Plus, McDonald's projects that efficiency improvements will result in an increase of roughly $100,000 in annual cash flow for the average U.S. restaurant, and the initiative will take about four years to return franchisees' investment. Average annual U.S. franchisee cash flow is currently about $500,000, up nearly 50% compared with 2019, boosted by franchisees opening new restaurants, according to Borden.
While McDonald's plans to spend more to fuel restaurant improvements, the company said it aims to cut costs elsewhere, although it did not offer specifics. By 2030, McDonald's is targeting an operating margin in the low-to-mid 50% range. In 2025, the company reported operating margins of 46.1%, according to company filings.
Some of that margin expansion will come from its general and administrative spending. By 2030, McDonald's is projecting that about 1.9% of its systemwide sales will go toward G&A. For comparison, the company is currently forecasting that 2.2% of its systemwide sales will be spent on G&A in 2026.
"At the company, AI will help enable a step-change improvement in corporate G&A," Borden said.
Higher operating margins will also come from increased revenue.
McDonald's is planning to build a media network that involves advertising other businesses on its digital drive-thru displays. Executives said it could grow to become a billion-dollar business. The company has started testing it over the last month at 450 company-owned restaurants. Media networks have become high-margin businesses for retailers like Amazon and Walmart.
McDonald's also has an eye on growing its sales globally. Some of that will come from new locations. Next year, the company expects restaurant openings will make up about 2.5% of its systemwide sales growth.
The company's accelerated expansion will slow in the following years. By 2030, McDonald's anticipates new restaurants will account for only about 2% of growth to systemwide sales.
Menu changes and more chicken
In recent years, the burger chain has leaned into menu items other than its core beef offerings to drive sales, namely chicken and beverages. By 2030, McDonald's wants to grow its global market share in those two categories by about 1.5 percentage points each.
McDonald's already sees nearly $15 billion in system sales from Chicken McNuggets, $4 billion from its McChicken and $2.5 billion from McCrispy menu items, according to Jill McDonald, the company's global chief restaurant experience officer. Altogether, the chain accounts for about 20% of chicken sales out of the entire $130 billion global category.
But McDonald's wants a bigger bite.
To grow its share of chicken sales, the chain plans to introduced hand-breaded chicken options. Chicken specialists like Chick-fil-A, Popeyes and Raising Cane's already hand-bread or batter their chicken for a crispier exterior and better taste. However, the technique requires more time and labor from employees.
U.S. restaurants will soon start piloting hand-breaded chicken menu items, McDonald said.
Other chicken options coming to McDonald's menu include new grilled chicken sandwiches and wraps and new flavors and sauces for Chicken McNuggets.
Likewise, McDonald's wants a bigger share of the global $230 billion beverage category, according to McDonald. Today, it holds a roughly 10% share and is the second-largest coffee player globally. But the category is growing quickly, presenting more opportunities for the chain to grow sales.
"Beverages are no longer just an add-on, but a reason to visit," McDonald said.
In the U.S., McDonald's rolled out an expanded drink menu earlier this year, featuring refreshers, crafted sodas and energy drinks. The chain now plans to launch more beverages in its international markets. It also aims to upgrade the quality of its coffee; U.S. restaurants will receive new espresso machines and the opportunity to customize their drinks with alternative milk choices.
And McDonald's has an eye on new food menu items, too.
"We're exploring bowls, grilled chicken and egg bites to expand protein-forward options across breakfast, lunch and dinner," McDonald's U.S. President Skye Anderson said.
Some of that protein-focused innovation is spurred by the growing adoption of GLP-1 drugs. For several years, investor concerns about how the medication will affect McDonald's sales have weighed on the stock. But executives on Wednesday expressed confidence that the chain will not lose customers because of changes to their appetites. Anderson said that 84% of households with at least one GLP-1 user still visit McDonald's.
"This is an opportunity," she said. "We don't need to win a new base of customers into McDonald's. Instead, we need to keep giving them more reasons to make McDonald's their first choice as their eating habits evolve."
Still, McDonald's isn't abandoning burgers. The company wants to hold onto its leadership in beef, too.
It currently holds onto about 40% share of the $50 billion worldwide beef category, McDonald said. It plans to add its fresh beef Quarter Pounders in more markets outside of the U.S., where it made the shift about eight years ago. Plus, Kempczinski told CNBC that there is even more opportunity in the U.S. to lean into the Quarter Pounder to steal share from its rivals who use frozen beef. The chain also wants to improve the quality of its burgers, building off the success of its "Best Burger" improvements that rolled out in 2024.
To do so, it plans on implementing "Make It Golden," a multiyear training program for corporate employees, restaurant workers and franchisees to ensure consistency, improved food quality and better customer service.
"While there's so much our customers love, we are falling short when it comes to consistent execution," Anderson said.
The emphasis on hospitality comes as customer expectations keep growing, McDonald's Global Chief People Officer Tiffanie Boyd told CNBC.
"People want and expect more because so many things have become more convenient, and so you can't just differentiate on something like convenience alone," Boyd said. "And, as we automate more things in our lives, we're finding that people have a higher expectation around the quality of a human interaction."
The program will begin rolling out on Oct. 5, the 124th birthday of Ray Kroc, who turned the burger restaurant into a global giant.

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