What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-12 compared with 2024-11-07 · 152 added, 272 removed, 456 unchanged (48% of the section changed)

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This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and the notes thereto, and the audited Consolidated Financial Statements and notes thereto included in our 2024 Annual Report on Form 10-K.

In the first quarter of 2024, the Company changed its rounding presentation to the nearest whole number in millions of reported amounts, except per share data or as otherwise designated.

The change in rounding presentation has been applied to all prior year amounts presented.

In certain circumstances, this change adjusted previously reported balances, however, these changes were not significant, and no other changes were made to previously reported financial information.

Additionally, certain columns and rows in financial tables within management's discussion and analysis of financial condition and results of operations may not add due to rounding.

Certain columns and rows in financial tables within management's discussion and analysis of financial condition and results of operations may not add due to rounding.

Percentages have been calculated from the underlying whole-dollar amounts for all periods presented.

The Company franchises and owns and operates McDonald’s restaurants, which serve a locally relevant menu of quality food and beverages in communities across more than 100 countries.

Of the 42,819 McDonald's restaurants at September 30, 2024, approximately 95% were franchised.

Of the 43,756 McDonald's restaurants at March 31, 2025, approximately 95% were franchised.

The Company’s reporting segments are aligned with its strategic priorities and reflect how management reviews and evaluates operating performance.

Significant reportable segments include the United States ("U.S.") and International Operated Markets.

In addition, there is the International Developmental Licensed Markets & Corporate segment, which includes the results of over 75 countries, as well as Corporate activities.

In addition, there is the International Developmental Licensed Markets & Corporate, which includes the results of over 75 countries, as well as Corporate activities.

McDonald’s franchised restaurants are owned and operated under one of the following structures - conventional franchise, developmental license or affiliate.

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Having Company-owned and operated restaurants provides Company personnel with a venue for restaurant operations training experience.

In addition, in our Company-owned and operated restaurants, and in collaboration with franchisees, the Company is able to further develop and refine operating standards, marketing concepts and product and pricing strategies that will ultimately benefit McDonald’s restaurants.

The Company’s revenues consist of sales by Company-owned and operated restaurants and fees from franchised restaurants owned and operated by conventional franchisees, developmental licensees and affiliates.

The Company’s revenues consist of sales by Company-owned and operated restaurants and fees from franchised restaurants operated by conventional franchisees, developmental licensees and affiliates.

Fees vary by type of site, amount of Company investment, if any, and local business conditions.

These fees, along with occupancy and operating rights, are stipulated in franchise/license agreements that generally have 20-year terms.

The Company’s Other revenues are comprised of fees paid by franchisees to recover a portion of costs incurred by the Company for various technology platforms and revenues from brand licensing arrangements to market and sell consumer packaged goods using the McDonald’s brand.

The Company’s Other revenues are comprised of fees paid by franchisees to recover a portion of costs incurred by the Company for various technology and digital platforms, and revenues from brand licensing arrangements to market and sell consumer packaged goods using the McDonald’s brand.

Conventional Franchise

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Conventional franchisees contribute to the Company’s revenue, primarily through the payment of rent and royalties based upon a percent of sales, with specified minimum rent payments, along with initial fees paid upon the opening of a new restaurant or grant of a new franchise.

The Company's heavily franchised business model is designed to generate stable and predictable revenue, which is largely a function of franchisee sales, and resulting cash flow streams.

The Company's

heavily franchised business model is designed to generate stable and predictable revenue, which is largely a function of franchisee sales, and resulting cash flow streams.

Developmental License or Affiliate

Under a developmental license or affiliate arrangement, licensees are responsible for operating and managing their businesses, providing capital (including the real estate interest) and developing and opening new restaurants.

The Company generally does not invest any capital under a developmental license or affiliate arrangement, and it receives a royalty based on a percent of sales, and generally receives initial fees upon the opening of a new restaurant or grant of a new license.

While developmental license and affiliate arrangements are largely the same, affiliate arrangements are used in a limited number of foreign markets (primarily China and Japan) within the International Developmental Licensed Markets & Corporate segment, as well as a limited number of individual restaurants within the International Operated Markets segment where the Company also has an equity investment and records its share of net results in equity in earnings of unconsolidated affiliates.

The Company generally does not invest any restaurant capital under a developmental license or affiliate arrangement, and it receives a royalty based on a percent of sales, and generally receives initial fees upon the opening of a new restaurant or grant of a new license.

While developmental license and affiliate arrangements are largely the same, affiliate arrangements are used in a limited number of foreign markets (primarily China and Japan) within the International Developmental Licensed Markets as well as a limited number of individual restaurants within the International Operated Markets, where the Company also has an equity investment and records its share of net results in equity in earnings of unconsolidated affiliates.

Strategic Direction

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The following purpose, mission and values underpin the Company’s success and are at the heart of our Strategy.

Through its size and scale, the Company embraces and prioritizes its role in and commitment to the communities in which it operates through its purpose to feed and foster communities, and its mission to make delicious feel-good moments easy for everyone.

The Company is guided by five core values that define who it is and how it runs its business across the three-legged stool of McDonald's franchisees, suppliers and employees:

Through its size and scale, the Company embraces and prioritizes its role and commitment to the communities in which it operates through its purpose to feed and foster communities, and its mission to make delicious feel-good moments easy for everyone.

The Company is guided by five core values that define who it is and how it runs the business across the three-legged stool of McDonald's franchisees, suppliers and employees:

Serve - We put our customers and people first;

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This is exemplified by campaigns that elevate the entire brand and continue to be scaled around the globe to connect with customers in authentic and relatable ways.

Another way McDonald’s connects with its customers is through personalized value and digital offers available in our mobile app.

The Company is committed to a marketing strategy that highlights value at every tier of the menu, as providing delicious and affordable menu options remains a cornerstone of the McDonald’s brand.

This includes everyday low-price options on our menu along with limited-time deals for our customers.

This includes everyday low-price options on our menu, affordable meal bundles, limited-time deals and personalized value and digital offers available in our mobile app.

• C ommit to the Core menu by tapping into customer demand for the familiar and focusing on serving our iconic products that are beloved by customers around the world such as our World Famous Fries, Big Mac, Quarter Pounder and Chicken McNuggets, which are some of our seventeen unique billion-dollar brands.

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a series of operational and formulation changes designed to deliver hotter, juicier, tastier burgers to nearly all markets by the end of 2026.

Further, the Company is focused on continuing to gain share in the rapidly growing chicken category, as we continue to aggressively expand our chicken brands.

This includes plans to offer the McCrispy sandwich in nearly all markets by the end of 2025 and to extend the McCrispy brand into strips and wraps in several markets.

Further, the Company is focused on continuing to gain share in the rapidly growing chicken category, as we continue to aggressively grow our chicken brands.

This includes plans to offer the McCrispy sandwich in nearly all major markets by the end of 2025 and to extend the McCrispy brand into strips and wraps in several markets.

These planned innovations and new menu offerings reflect the Company’s ability to meet evolving customer preferences.

The Company also continues to see a significant

opportunity with coffee, demonstrated by markets leveraging the McCafé brand, customer experience, value and quality to drive long-term growth.

The Company also continues to see a significant opportunity with beverages and desserts to drive long-term growth.

• D ouble Down on the 4D's:

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a digital enhancement that enables crew to begin assembling a customer’s mobile order prior to arrival at the restaurant to expedite service and elevate customer satisfaction.

The Company plans to deploy this initiative across its top six markets by the end of 2025.

The Company has successful loyalty programs in approximately 50 markets, including its top six markets.

McDonald’s loyalty customers have proven to be highly engaged, and the Company plans to increase its 90-day active users to 250 million by 2027.

Further, the Company plans to grow its annual Systemwide sales to loyalty members to $45 billion by 2027.

The Company offers delivery from over 36,000 restaurants across approximately 100 markets, representing over 85% of McDonald’s restaurants.

The Company plans to deploy this initiative in its top six markets by the end of 2025.

The Company has successful loyalty programs in 60 markets, including its top six markets.

McDonald’s loyalty customers have proven to be highly engaged, and the Company plans to increase its 90-day active users to 250 million by the end of 2027.

Further, the Company plans to grow its annual Systemwide sales to loyalty members to $45.0 billion by the end of 2027.

The Company offers delivery from over 38,000 restaurants across approximately 100 markets, representing nearly 90% of McDonald's restaurants.

The Company is continuing to build on and enhance the delivery experience for customers, including adding the ability to place a delivery order in our mobile app (a feature that is currently available in five of the Company’s top markets).

The Company continues to scale this capability and expects to increase the percentage of Systemwide delivery sales originating from our mobile app to 30% by 2027.

The Company continues to scale this capability and expects to increase the percentage of Systemwide delivery sales originating from our mobile app to 30% by the end of 2027.

The Company also has long-term strategic partnerships with delivery providers that continue to benefit the Company, customers and franchisees by optimizing operational efficiencies and creating a seamless customer experience.

◦ Drive Thru:

The Company has the most drive thru locations worldwide, with more than 27,000 drive thru locations globally, including nearly 95% of the approximately 13,500 locations in the U.S.

The Company has the most drive thru locations worldwide, with nearly 28,000 drive thru locations globally, including over 95% of the over 13,500 locations in the U.S.

This channel remains a competitive advantage in meeting customers’ demand for flexibility and choice.

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The Company will continue to accelerate the pace of restaurant openings to attempt to fully capture the demand being driven through our Strategy in many of our largest markets.

In 2024, the Company plans to open more than 2,100 new restaurants across the globe, which will contribute to nearly 4% new unit growth (net of closures).

Further, the Company continues to build on its industry-leading development progress by targeting expansion to 50,000 restaurants by the end of 2027, which would make it the fastest period of restaurant unit growth in Company history.

In 2025, the Company plans to open about 2,200 new restaurants (gross) across the globe, which will contribute to slightly over 4% new unit growth (net of closures).

Further, the Company continues to build on its industry-leading development, by progressing toward the targeted expansion to 50,000 restaurants by the end of 2027, which would make it the fastest period of restaurant unit growth in Company history.

Foundation and Platforms

Foundational to our Strategy is keeping the customer and restaurant crew at the center of everything the Company does, along with a relentless focus on running great restaurants, empowering its people and continuing to modernize our ways of working.

Foundational to our Strategy is keeping the customer and restaurant crew at the center of everything the Company does, along with focusing relentlessly on running great restaurants, empowering our people and continuing to modernize our ways of working.

Further, as part of the Company’s plans for long term growth and solidifying McDonald’s leadership position, the Company will continue to develop and implement three technology-enabled platforms designed to build our competitive advantages, cement our place in culture and stay one step ahead of our customers’ expectations.

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• Restaurant:

The Company is building the easiest and most efficient restaurant operating platform which enables franchisees to run restaurants more efficiently and utilize the latest cloud-based technology to make it easier for restaurant crew to deliver exceptional customer service.

The Company is building the easiest and most efficient restaurant operating platform which enables the Company and franchisees to run restaurants more efficiently and utilize the latest cloud-based technology to make it easier for restaurant crew to deliver exceptional customer service.

The Company intends to deploy new, universal software that all McDonald’s restaurants will run on, enabling restaurants to roll out innovation even faster, with less complexity and more stability;

and customers will enjoy a more familiar, consistent experience.

The Company is building a modern company platform that unlocks speed and innovation throughout the organization, to enable further growth as it modernizes the way it works by focusing on becoming faster, more innovative and more efficient at solving problems for its customers and people.

Developing and implementing these platforms includes continued investments in digital, innovation and our Global Business Services organization.

Our Strategy is aligned with the Company’s capital allocation philosophy of investing in opportunities to grow the business and drive strong returns, for example through new restaurants and reinvesting in existing restaurants, and returning free cash flow to shareholders over time through dividends and share repurchases.

The Company is building a modern company platform, through our GBS organization, that unlocks speed and innovation throughout the organization, to enable further growth as it modernizes the way it works by focusing on becoming faster, more innovative and more efficient at solving problems for its customers and people.

Our Strategy is aligned with the Company’s capital allocation philosophy of:

(i) invest in opportunities to grow the business and drive strong returns, including both capital expenditures as well as investments in technology, digital, and our GBS organization, (ii) prioritize our dividend and (iii) repurchase shares with remaining free cash flow over time.

The Company believes our Strategy builds on our inherent strengths by harnessing the Company’s competitive advantages while leveraging its size, scale, agility and the power of the McDonald’s brand to adapt and adjust to meet customer demands in varying economic environments, including the current industry-wide challenges associated with more discerning consumer spending.

Our Strategy is supported by a strong global senior leadership team aimed at executing against the MCD growth pillars, further developing our three platforms and driving long-term growth, including both guest count-led and industry market share growth.

Third Quarter and Nine Months 2024 Financial Performance

Global comparable sales decreased 1.5% for the quarter and decreased 0.2% for the nine months.

comparable sales increased 0.3% for the quarter and 0.7% for the nine months.

Comparable sales results for both periods reflect average check growth, partly offset by slightly negative comparable guest counts for the quarter and negative comparable guest counts for the nine months.

Effective value and marketing campaigns featuring the core menu, successful restaurant level execution and continued digital and delivery growth contributed to slightly positive comparable sales results for both periods.

• International Operated Markets segment comparable sales decreased 2.1% for the quarter and 0.3% for the nine months.

Segment performance for the quarter was impacted by negative comparable sales across a number of markets, driven by France and the U.K.

For the nine months, segment performance was driven by negative comparable sales across a number of markets, led by France.

• International Developmental Licensed Markets segment comparable sales decreased 3.5% for the quarter and 1.7% for the nine months.

The continued impact of the war in the Middle East and negative comparable sales in China more than offset positive comparable sales in Latin America, for both periods.

In addition to the comparable sales results, the Company had the following financial results for the quarter and nine months:

• Consolidated revenues increased 3% (2% in constant currencies) for the quarter and increased 2% (2% in constant currencies) for the nine months.

• Systemwide sales were flat (flat in constant currencies) for the quarter and increased 1% (1% in constant currencies) for the nine months.

• Consolidated operating income decreased 1% (1% in constant currencies) for the quarter and was flat (flat in constant currencies) for the nine months.

Excluding current and prior year charges detailed in the Operating Income and Operating Margin section on page 29 of this report, consolidated operating income increased 2% (1% in constant currencies) for the quarter and increased 1% (1% in constant currencies) for the nine months.

• Diluted earnings per share was $ 3.13 for the quarter, a decrease of 1% (1% in constant currencies) and $ 8.59 for the nine months, a decrease of 2% (1% in constant currencies).

Excluding current and prior year charges detailed in the Net Income and Diluted Earnings Per Share section on page 23 of this report, diluted earnings per share for the quarter was $3.23, an increase of 1% (1% in constant currencies) and $8.89, a decrease of 1% (1% in constant currencies) for the nine months.

Our Strategy is supported by a strong global senior leadership team aimed at executing against the MCD growth pillars, further developing our three platforms and driving long-term growth through increasing guest counts and growing industry market share.

First Quarter 2025 Financial Performance

Global comparable sales decreased 1.0% (excluding Leap Day in the prior year, global comparable sales were essentially flat):

decreased 3.6%.

Comparable sales results were primarily driven by negative comparable guest counts.

• International Operated Markets decreased 1.0%.

Comparable sales reflected mixed results across the markets, primarily impacted by negative comparable sales in the U.K.

• International Developmental Licensed Markets increased 3.5%.

Positive comparable sales were primarily driven by the Middle East and Japan.

In addition to the comparable sales results, the Company had the following financial results:

• Consolidated revenues decreased 3% (2% in constant currencies).

• Systemwide sales decreased 1% (increased 1% in constant currencies).

• Consolidated operating income decreased 3% (1% in constant currencies).

Results reflected pre-tax charges of $66 million and $35 million for the current year and prior year, respectively, primarily related to restructuring charges associated with Accelerating the Organization.

Excluding these current and prior year charges, consolidated operating income decreased (2)% (flat in constant currencies).

• Diluted earnings per share was $ 2.60 , a decrease of 2% (1% in constant currencies).

Excluding the current year charges described above of $0.07 per share, diluted earnings per share was $2.67, a decrease of 1% (increase of 1% in constant currencies) when also excluding prior year charges.

Management reviews and analyzes business results excluding the effect of foreign currency translation, impairment and other strategic charges and gains, as well as material regulatory and other income tax impacts, and bases incentive compensation plans on these results because the Company believes this better represents underlying business trends.

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Systemwide sales to loyalty members is comprised of all sales to customers who self-identify as a loyalty member when transacting with both Company-owned and operated and franchised restaurants.

Systemwide sales to loyalty members are measured across approximately 50 markets with loyalty programs.

Systemwide sales to loyalty members represents an aggregation of the prior four quarters of sales to loyalty members active in the last 90 days.

Systemwide sales to loyalty members are measured across 60 markets with loyalty programs.

Systemwide sales to loyalty members represents an aggregation of the prior four quarters of sales to loyalty members active in the last 90 days of the respective quarter.

While franchised sales are not recorded as revenues by the Company, management believes the information is important in understanding the Company's financial performance because these sales are the basis on which the Company calculates and records franchised revenues and are indicative of the financial health of the franchisee base.

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Dollars in millions, except per share data

Quarters Ended September 30, 2024 2023 Inc/(Dec)

Sales by Company-owned and operated restaurants $ 2,656 $ 2,556 4 %

Quarters Ended March 31, 2025 2024 Inc/(Dec)

Revenues from franchised restaurants $ 3,661 $ 3,723 (2) %

Other revenues 124 89 39

Total revenues 6,873 6,692 3

Operating costs and expenses

Company-owned and operated restaurant expenses 2,248 2,135 5

Franchised restaurants-occupancy expenses 646 625 3

Other restaurant expenses 104 68 53

Selling, general & administrative expenses

Depreciation and amortization 111 97 15

Other 536 584 (8)

Other operating (income) expense, net 39 ( 25 ) n/m

Total operating costs and expenses 3,685 3,484 6

Operating income 3,188 3,208 (1)

Interest expense 381 341 12

Nonoperating (income) expense, net ( 36 ) ( 56 ) (36)

Income before provision for income taxes 2,843 2,924 (3)

Provision for income taxes 588 606 (3)

Net income $ 2,255 $ 2,317 (3) %

Earnings per common share-basic $ 3.15 $ 3.19 (1) %

Earnings per common share-diluted $ 3.13 $ 3.17 (1) %

Nine Months Ended September 30, 2024 2023 Inc/(Dec)

Sales by Company-owned and operated restaurants 2,132 2,355 (9)

Revenues from franchised restaurants 11,756 11,568 2

Other revenues 162 91 78

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Operating costs and expenses

Company-owned and operated restaurant expenses 6,358 6,149 3

Franchised restaurants-occupancy expenses 620 627 (1)

Other restaurant expenses 241 188 28

Company-owned and operated restaurant expenses 1,859 2,035 (9)

Other restaurant expenses 140 68 n/m

Selling, general & administrative expenses

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Other 575 622 (7)

Other operating (income) expense, net 129 68 90

Other operating (income) expense, net 7 ( 17 ) n/m

Total operating costs and expenses 3,308 3,433 (4)

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Impact of the War in the Middle East

The Company’s Systemwide sales and revenue have continued to be negatively impacted by the war in the Middle East, primarily in the International Developmental Licensed Markets & Corporate segment, where the majority of restaurants are under a developmental license or affiliate arrangement.

The Company is monitoring the evolving situation, which it expects to continue to have a negative impact on Systemwide sales and revenue as long as the war continues.

The Company’s Systemwide sales and revenue have continued to be negatively impacted by the war in the Middle East, primarily in the International Developmental Licensed Markets, where the majority of restaurants are under a developmental license or affiliate arrangement.

The Company is monitoring the evolving situation, which it expects to continue to have a negative impact on Systemwide sales and revenue until the war concludes and the macroeconomic conditions recover.

Impact of Foreign Currency Translation

The impact of foreign currency translation on consolidated operating results for the quarter primarily reflected the strengthening of the Euro and British Pound.

Results for the nine months primarily reflected the weakening of most major currencies against the U.S.

Dollar, partly offset by the strengthening of the British Pound and the Euro.

The impact of foreign currency translation on consolidated operating results for the quarter primarily reflected the weakening of all major currencies against the U.S.

Dollar, primarily driven by the Euro.

While changes in foreign currency exchange rates affect reported results, McDonald's mitigates exposures, where practical, by purchasing goods and services in local currencies, financing in local currencies and hedging certain foreign-denominated cash flows.

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Benefit/ (Cost)

Quarters Ended September 30, 2024 2023 2024

Quarters Ended March 31, 2025 2024 2025

Revenues $ 5,956 $ 6,169 $ (114)

Company-owned and operated margins 407 421 (1)

Franchised margins 3,041 3,096 (55)

Selling, general & administrative expenses 647 680 (1)

Operating income 3,188 3,208 7

Net income 2,255 2,317 (3)

Earnings per share-diluted $ 3.13 $ 3.17 $ (0.01)

Benefit/ (Cost)

Nine Months Ended September 30, 2024 2023 2024

Revenues $ 19,532 $ 19,088 $ (22)

Company-owned and operated margins 273 320 (7)

Franchised margins 9,855 9,726 (9)

Selling, general & administrative expenses 682 720 5

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Net Income and Diluted Earnings per Share

For the quarter, net income decreased 3% (3% in constant currencies) to $ 2,255 million, and diluted earnings per share decreased 1% (1% in constant currencies) to $ 3.13 .

Foreign currency translation had a negative impact of $0.01 on diluted earnings per share.

For the nine months, net income decreased 3% (3% in constant currencies) to $ 6,207 million, and diluted earnings per share decreased 2% (1% in constant currencies) to $ 8.59 .

Net income decreased 3% (2% in constant currencies) to $ 1,868 million, and diluted earnings per share decreased 2% (1% in constant currencies) to $ 2.60 .

Foreign currency translation had a negative impact of $0.04 on diluted earnings per share.

Results for 2024 included the following:

• Net pre-tax charges of $52 million, or $0.05 per share, for the quarter and $142 million, or $0.15 per share, for the nine months primarily consisted of transaction costs and non-cash impairment charges associated with the sale of McDonald's business in South Korea and transaction costs associated with the acquisition of McDonald's business in Israel

• Pre-tax charges of $46 million, or $0.05 per share, for the quarter and $146 million, or $0.15 per share, for the nine months related to restructuring charges associated with the Company's internal effort to modernize ways of working ( Accelerating the Organization)

Results for 2023 included the following:

• Pre-tax charges of $26 million, or $0.02 per share, for the quarter and $224 million, or $0.23 per share, for the nine months related to the Company's Accelerating the Arches growth strategy, including restructuring charges associated with Accelerating the Organization

Excluding the above items, lower Selling, general, and administrative expenses and higher Franchised margins drove positive operating income performance for the quarter.

Results for the nine months reflected positive operating income performance driven primarily by higher sales-driven Franchised margins, partly offset by higher Selling, general, and administrative expenses.

Results for both periods reflected higher interest expense.

During the quarter, the Company paid a dividend of $1.67 per share, or $1.2 billion, bringing total dividends paid for the nine months to $3.6 billion.

Additionally, during the quarter, the Company repurchased 1.7 million shares of stock for $444 million, bringing total purchases for the nine months to 8.3 million shares, or $2.3 billion.

In September 2024, the Company declared a 6% increase in its quarterly cash dividend to $1.77 per share, payable on December 16, 2024.

Results included pre-tax charges of $66 million, or $0.07 per share, for the three months ended March 31, 2025 and $35 million, or $0.04 per share, for the three months ended March 31, 2024, primarily related to restructuring charges associated with the Company's internal effort to modernize ways of working ( Accelerating the Organization).

Excluding the above items, operating income performance was primarily driven by lower Franchised and Company-owned and operated margins.

During the quarter, the Company paid a quarterly dividend of $1.77 per share, or $1.3 billion.

Additionally, the Company repurchased 1.5 million shares of stock for $447 million.

NET INCOME AND EARNINGS PER SHARE-DILUTED RECONCILIATION

Dollars in millions, except per share data

Quarters Ended September 30,

Net Income Earnings per share - diluted

2024 2023 Inc/ (Dec) Inc/ (Dec)

Translation 2024 2023 Inc/ (Dec) Inc/ (Dec)

GAAP $ 2,255 $ 2,317 (3) % (3) % $ 3.13 $ 3.17 (1) % (1) %

(Gains)/Charges 67 20 0.10 0.02

Non-GAAP $ 2,322 $ 2,337 (1) % (1) % $ 3.23 $ 3.19 1 % 1 %

Nine Months Ended September 30,

Quarters Ended March 31,

Net Income Earnings per share - diluted

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Non-GAAP $ 1,919 $ 1,957 (2) % — % $ 2.67 $ 2.70 (1) % 1 %

The Company's revenues consist of sales by Company-owned and operated restaurants and fees from restaurants owned and operated by franchisees, developmental licensees and affiliates.

The Company's revenues consist of fees from restaurants owned and operated by franchisees, developmental licensees and affiliates and sales by Company-owned and operated restaurants.

Revenues from conventional franchised restaurants include rent and royalties based on a percent of sales with minimum rent payments, and initial fees.

Revenues from restaurants licensed to developmental licensees and affiliates include a royalty based on a percent of sales, and generally include initial fees.

Franchised restaurants represented approximately 95% of McDonald's restaurants worldwide at September 30, 2024 .

The Company’s Other revenues are primarily comprised of fees paid by franchisees to recover a portion of costs incurred by the Company for various technology and digital platforms and revenues from brand licensing arrangements to market and sell consumer packaged goods using the McDonald’s brand.

Franchised restaurants represented approximately 95% of McDonald's restaurants worldwide at March 31, 2025.

The Company's heavily franchised business model is designed to generate stable and predictable revenue, which is largely a function of franchisee sales, and resulting cash flow streams.

In the quarter and nine months, the Company provided an immaterial amount of assistance, including royalty relief and/or deferral of cash collection for certain franchisees impacted by the war in the Middle East in the International Developmental Licensed Markets & Corporate segment.

This assistance may continue as long as the war continues.

Dollars in millions

Quarters Ended September 30, 2024 2023 Inc/ (Dec) Inc/ (Dec)

Company-owned and operated sales

$ 822 $ 817 1 % 1 %

International Operated Markets 1,485 1,520 (2) (3)

International Developmental Licensed Markets & Corporate 349 219 59 62

Total $ 2,656 $ 2,556 4 % 4 %

Quarters Ended March 31, 2025 2024 Inc/ (Dec) Inc/ (Dec)

Franchised revenues

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Total $ 3,661 $ 3,723 (2) % — %

Total Company-owned and operated sales and Franchised revenues

$ 2,673 $ 2,657 1 % 1 %

International Operated Markets 3,266 3,258 — (1)

International Developmental Licensed Markets & Corporate 810 687 18 20

Total $ 6,750 $ 6,603 2 % 2 %

Total Other revenues $ 124 $ 89 39 % 38 %

Total Revenues $ 6,873 $ 6,692 3 % 2 %

Nine Months Ended September 30, 2024 2023 Inc/ (Dec) Inc/ (Dec)

Company-owned and operated sales

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International Operated Markets 1,309 1,362 (4) —

International Developmental Licensed Markets & Corporate 777 614 26 30

Total $ 7,472 $ 7,267 3 % 3 %

Franchised revenues

$ 5,417 $ 5,350 1 % 1 %

International Operated Markets 5,039 4,889 3 2

International Developmental Licensed Markets & Corporate 1,300 1,329 (2) 1

International Developmental Licensed Markets & Corporate 99 212 (53) n/m

Total $ 2,132 $ 2,355 (9) % (7) %

Total Company-owned and operated sales and Franchised revenues

Total Franchised revenues and Company-owned and operated sales

$ 2,403 $ 2,509 (4) % (4) %

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Total Revenues $ 5,956 $ 6,169 (3) % (2) %

• Total Company-owned and operated sales and franchised revenues increased 2% (2% in constant currencies) for the quarter and increased 2% (2% in constant currencies) for the nine months, with both periods benefiting from sales performance in the U.S.

and International Operated Markets segment.

Revenue growth in the International Developmental Licensed Markets & Corporate segment is primarily due to the acquisition of McDonald's business in Israel, partly offset by the continued impact of the war in the Middle East, which began in October 2023.

n/m Not meaningful

• Total Franchised revenues and Company-owned and operated sales decreased 5% (3% in constant currencies).

revenues reflected negative sales performance and International Operated Markets' revenues were negatively impacted by foreign currency translation.

International Developmental Licensed Markets & Corporate revenues were impacted by the prior year sale of McDonald's business in South Korea, partly offset by the prior year acquisition of McDonald's business in Israel and positive sales performance.

Comparable Sales

The following table presents the percent change in comparable sales for the quarters and nine months ended September 30, 2024 and 2023:

The following table presents the percent change in comparable sales for the three months ended March 31, 2025 and 2024:

Increase/(Decrease)

Quarters Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Quarters Ended March 31,

(3.6) % 2.5 %

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Systemwide Sales and Franchised Sales

The following table presents the percent change in Systemwide sales for the quarter and nine months ended September 30, 2024:

The following table presents the percent change in Systemwide sales for the three months ended March 31, 2025:

SYSTEMWIDE SALES*

Quarter Ended September 30, 2024 Nine Months Ended September 30, 2024

Quarter Ended March 31, 2025

Inc/ (Dec) Inc/ (Dec)

Translation Inc/ (Dec) Inc/ (Dec)

1 % 1 % 1 % 1 %

International Operated Markets (2) 1

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Franchised sales are not recorded as revenues by the Company, but are the basis on which the Company calculates and records franchised revenues and are indicative of the financial health of the franchisee base.

The following table presents Franchised sales and the related increases/(decreases) for the quarters and nine months ended September 30, 2024 and 2023:

The following table presents Franchised sales and the related increases/(decreases) for the three months ended March 31, 2025 and 2024:

FRANCHISED SALES

Dollars in millions

Quarters Ended September 30, 2024 2023 Inc/ (Dec) Inc/ (Dec)

$ 12,893 $ 12,794 1 % 1 %

International Operated Markets 10,334 10,181 1 —

International Developmental Licensed Markets 8,106 8,387 (3) (1)

Total $ 31,333 $ 31,362 — % — %

Ownership type

Conventional franchised $ 23,088 $ 22,852 1 % — %

Developmental licensed 5,005 5,382 (7) (4)

Foreign affiliated 3,240 3,128 4 4

Total $ 31,333 $ 31,362 — % — %

Nine Months Ended September 30, 2024 2023 Inc/ (Dec) Inc/ (Dec)

Quarters Ended March 31, 2025 2024 Inc/ (Dec) Inc/ (Dec)

$ 11,771 $ 12,086 (3) % (3) %

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Franchised restaurant margins are measured as revenues from franchised restaurants less franchised restaurant occupancy costs.

Franchised revenues include rent and royalties based on a percent of sales, and initial fees.

Franchised restaurant occupancy costs include lease expense and depreciation, as the Company generally owns or secures a long-term lease on the land and building for the restaurant location.

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Dollars in millions

Amount Inc/ (Dec) Inc/ (Dec)

Quarters Ended September 30, 2024 2023

$ 1,525 $ 1,518 — % — %

International Operated Markets 1,463 1,440 2 —

International Developmental Licensed Markets & Corporate 459 464 (1) 1

Total $ 3,447 $ 3,422 1 % — %

Company-owned and operated

$ 105 $ 122 (14) % (14) %

International Operated Markets 258 286 (10) (10)

International Developmental Licensed Markets & Corporate n/m n/m n/m n/m

Total $ 407 $ 421 (3) % (3) %

Total restaurant margins

$ 1,631 $ 1,640 (1) % (1) %

International Operated Markets 1,722 1,726 — (1)

International Developmental Licensed Markets & Corporate n/m n/m n/m n/m

Total $ 3,855 $ 3,843 — % — %

Amount Inc/ (Dec) Inc/ (Dec)

Nine Months Ended September 30, 2024 2023

Inc/ (Dec) Inc/ (Dec)

Quarters Ended March 31, 2025 2024

$ 1,360 $ 1,405 (3) % (3) %

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n/m Not meaningful

• Franchised margins in the U.S.

and International Operated Markets segment reflected sales-driven growth for both periods.

Franchised margins represented approximately 90% of restaurant margin dollars.

• Company-owned and operated margins reflected positive sales performance in the U.S.

and negative sales performance in the International Operated Markets segment for the quarter while the nine months benefited from positive sales performance for these two segments.

and the International Operated Markets segment were impacted by ongoing inflationary cost pressures for both periods.

• Total restaurant margins included depreciation and amortization expense of $420 million and $1.2 billion for the quarter and nine months, respectively.

• Franchised margins reflected negative sales performance in the U.S.

and the negative impact of foreign currency translation in the International Operated Markets.

International Developmental Licensed Markets & Corporate reflected positive sales performance.

Franchised margins represented more than 90% of restaurant margin dollars.

• Company-owned and operated margins in the U.S.

reflected negative sales performance and the negative impact of foreign currency translation in the International Operated Markets.

and International Operated Markets were also impacted by ongoing inflationary cost pressures.

• Total restaurant margins included depreciation and amortization expense of $413 million and $411 million for the three months ended March 31, 2025 and 2024, respectively.

Selling, General & Administrative Expenses

• Selling, general and administrative expenses decreased $33 million, or 5% (5% in constant currencies), for the quarter and increased $63 million, or 3% (3% in constant currencies), for the nine months.

Results for the quarter primarily reflected lower incentive-based compensation, while the nine months primarily reflected investments in digital and technology, including transformation efforts, related to Accelerating the Organization and costs related to the 2024 Worldwide Owner/Operator convention, partly offset by lower incentive-based compensation.

• Selling, general and administrative expenses as a percent of Systemwide sales were 2.1% for both the nine months ended 2024 and 2023.

• Selling, general and administrative expenses decreased $38 million or 5% (5% in constant currencies).

Results primarily reflect the timing of investments in digital and technology, as well as transformation efforts, under our Accelerating the Arches strategy and the comparison to prior year costs related to the 2024 Worldwide Owner/Operator convention.

• Selling, general and administrative expenses as a percent of Systemwide sales were 2.2% and 2.3% for the three months ended March 31, 2025 and 2024, respectively.

Other Operating (Income) Expense, Net

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Dollars in millions

Quarters Ended Nine Months Ended

September 30, September 30,

2024 2023 2024 2023

Quarters Ended

Gains on sales of restaurant businesses $ (8) $ (9)

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Total $ 7 $ ( 17 )

• Gains on sales of restaurant businesses decreased for the nine months, primarily due to fewer sales of restaurants in the International Operated Markets segment and in the U.S.

• Equity in earnings of unconsolidated affiliates for the nine months reflected higher equity in earnings in China as a result of the Company's increased ownership in Grand Foods Holding when compared to the same period in 2023 as well as improved operating performance in Japan.

• Impairment and other charges (gains), net reflected net pre-tax charges of $52 million and $142 million for the quarter and nine months, respectively, primarily consisting of transaction costs and non-cash impairment charges associated with the sale of McDonald's business in South Korea and transaction costs associated with the acquisition of McDonald's business in Israel and pre-tax charges of $46 million and $146 million for the quarter and nine months, respectively, related to restructuring charges associated with the Company's internal effort to modernize ways of working ( Accelerating the Organization) .

Results for the quarter and nine months 2023 reflected $26 million and $224 million, respectively, of pre-tax charges related to the Company's Accelerating the Arches growth strategy, including restructuring charges associated with Accelerating the Organization.

• Equity in earnings of unconsolidated affiliates reflected higher equity in earnings in China as a result of improved operating performance and the Company's increased ownership in Grand Foods Holding when compared to the same period in 2024.

• Impairment and other charges (gains), net reflected pre-tax charges of $66 million and $35 million for the three months ended March 31, 2025 and 2024, respectively, primarily related to restructuring charges associated with Accelerating the Organization.

Operating Income

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Dollars in millions

Quarters Ended September 30, 2024 2023 Inc/ (Dec) Inc/ (Dec)

$ 1,493 $ 1,478 1 % 1 %

International Operated Markets 1,602 1,585 1 —

International Developmental Licensed Markets & Corporate 93 146 (36) (29)

Total $ 3,188 $ 3,208 (1) % (1) %

Nine Months Ended September 30, 2024 2023 Inc/ (Dec) Inc/ (Dec)

Quarters Ended March 31, 2025 2024 Inc/ (Dec) Inc/ (Dec)

$ 1,302 $ 1,395 (7) % (7) %

International Operated Markets 1,289 1,365 (6) (2)

International Developmental Licensed Markets & Corporate ( 15 ) 282 n/m (92)

International Developmental Licensed Markets & Corporate 57 ( 25 ) n/m n/m

Total $ 2,648 $ 2,736 (3) % (1) %

Operating margin 44.5 % 44.3 %

• Operating income decreased $20 million, or 1% (1% in constant currencies), for the quarter and decreased $1 million, or was flat (flat in constant currencies), for the nine months.

Results reflected net pre-tax charges of $52 million and $142 million for the quarter and nine months, respectively, primarily consisting of transaction costs and non-cash impairment charges associated with the sale of McDonald's business in South Korea and transaction costs associated with the acquisition of McDonald's business in Israel and pre-tax restructuring charges of $46 million and $146 million for the quarter and nine months, respectively, related to Accelerating the Organization .

• Operating income decreased $87 million or 3% (1% in constant currencies).

Results reflected pre-tax charges of $66 million and $35 million for the three months ended March 31, 2025 and 2024, respectively, primarily related to restructuring charges associated with Accelerating the Organization .

OPERATING INCOME & OPERATING MARGIN RECONCILIATION*

Dollars in millions

Quarters Ended September 30, Nine Months Ended September 30,

Quarters Ended March 31,

2025 2024 Inc/ (Dec) Inc/ (Dec)

Translation 2024 2023 Inc/ (Dec) Inc/ (Dec)

GAAP operating income $ 2,648 $ 2,736 (3) % (1) %

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Non-GAAP operating margin 45.6 % 44.9 %

*Refer to the Impairment and other charges (gains), net line within the Other Operating (Income) Expense, Net section on page 28 for details of the charges in this table.

• Excluding the current and prior year charges shown in the table above, operating income increased 2% (1% in constant currencies) for the quarter and increased 1% (1% in constant currencies) for the nine months.

Results for the nine months reflected positive operating results in the U.S.

and International Operated Markets segment primarily due to sales-driven growth in Franchised margins, partly offset by higher Selling, general and administrative expenses in the International Developmental Licensed Markets & Corporate segment.

*Refer to the Impairment and other charges (gains), net line within the Other Operating (Income) Expense, Net section above for details of the charges in this table.

• Excluding the charges for the three months ended March 31, 2025 and 2024 shown in the table above, operating income decreased 2% (flat in constant currencies).

Results primarily reflected lower sales-driven Franchised and Company-owned and operated margins in the U.S.

and International Operated Markets, partly offset by positive operating results in International Developmental Licensed Markets & Corporate primarily due to lower Selling, general, and administrative expenses.

• Operating margin is defined as operating income as a percent of total revenues.

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Additionally, temporary restaurant closures, which vary by segment, impact the contribution of each segment to the consolidated operating margin.

The decrease in non-GAAP operating margin was primarily due to ongoing inflationary cost pressures as well as investments in Selling, general and administrative expenses.

The increase in non-GAAP operating margin was primarily due to the prior year sale of McDonald's business in South Korea and lower Selling, general and administrative expenses, partly offset by the prior year acquisition of McDonald's business in Israel and lower Franchised and Company-owned and operated margin dollars.

Interest Expense

• Interest expense increased 12% (12% in constant currencies) for the quarter and 13% (12% in constant currencies) for the nine months.

Results for both periods reflected higher average debt balances as well as higher average interest rates.

• Interest expense increased 1% (2% in constant currencies) primarily due to higher average debt balances as well as higher average interest rates.

Nonoperating (Income) Expense, Net

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Dollars in millions

Quarters Ended Nine Months Ended

September 30, September 30,

2024 2023 2024 2023

Quarters Ended

Interest income $ (17) $ (47)

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Total $ ( 57 ) $ ( 45 )

• Interest income for both periods decreased due to lower average cash balances.

• The effective income tax rate was 20.7 % and 20.7 % for the quarters ended 2024 and 2023, respectively, and 20.5 % and 19.7 % for the nine months ended 2024 and 2023, respectively.

• Interest income decreased due to lower average cash balances.

• The effective income tax rate was 19.8 % and 19.9 % for the three months ended March 31, 2025 and 2024, respectively.

The Company has a long history of generating significant cash from operations and has substantial credit capacity to fund operating and discretionary spending to invest in opportunities to grow the business, such as restaurant development, in addition to funding debt service payments, dividends and share repurchases.

Cash provided by operations totaled $6.8 billion and exceeded capital expenditures by $4.8 billion for the nine months 2024.

Cash provided by operations was slightly down compared with the nine months 2023, in line with operating results.

Cash used for investing activities totaled $4.6 billion for the nine months 2024, an increase of $2.3 billion compared with the nine months 2023.

The increase was primarily due to the Company's increased ownership stake in McDonald's China business and the acquisition of McDonald's business in Israel.

Cash used for financing activities totaled $5.6 billion for the nine months 2024, an increase of $1.8 billion compared with the nine months 2023.

The increase was primarily due to lower issuances and higher net repayments of long term financing arrangements in the current year.

Cash provided by operations totaled $2.4 billion and exceeded capital expenditures by $1.9 billion.

Cash provided by operations slightly increased compared to the prior year primarily due to changes in working capital.

Cash used for investing activities totaled $771 million, a decrease of $1.7 billion primarily due to the Company's increased ownership stake in McDonald's China business in the prior year.

Cash used for financing activities totaled $1.5 billion, a decrease of $2.1 billion.

The decrease was primarily due to $1.5 billion of debt issuances in the current year.

Based on current conditions, the following is provided to assist in forecasting the Company's future results for 2025.

• The Company expects net restaurant unit expansion will contribute nearly 2% to 2024 Systemwide sales growth, in constant currencies.

• The Company expects net restaurant unit expansion will contribute slightly over 2% to 2025 Systemwide sales growth, in constant currencies.

• The Company expects full year 2025 Selling, general and administrative expenses of about 2.2% of Systemwide sales.

• The Company expects 2025 operating margin percent to be in the mid-to-high 40% range.

• Based on current interest and foreign currency exchange rates, the Company expects interest expense for the full year 2024 to increase approximately 11% driven primarily by higher average interest rates and a higher average debt balance.

• The Company expects the effective income tax rate for the full year 2024 to be in the 20% to 22% range.

• Based on current interest and foreign currency exchange rates, the Company expects interest expense for the full year 2025 to increase between 4% and 6% driven primarily by higher average debt balances and higher average interest rates.

• The Company expects the effective income tax rate for the full year 2025 to be between 20% and 22%.

Some volatility may result in a quarterly tax rate outside of the annual range.

• The Company expects 2024 capital expenditures to be between $2.5 and $2.7 billion, more than half of which will be directed towards new restaurant unit expansion across the U.S.

• The Company expects 2025 capital expenditures to be between $3.0 and $3.2 billion, with the majority directed towards new restaurant unit expansion across the U.S.

and International Operated Markets.

Globally, the Company expects to open more than 2,100 restaurants.

The Company will open about 500 restaurants in the U.S.

and International Operated Markets segments, and developmental licensees and affiliates will contribute capital towards more than 1,600 restaurant openings in their respective markets.

The Company expects over 1,600 net restaurant additions in 2024.

• The Company expects to achieve a free cash flow conversion rate in the 90% range.

Globally, the Company expects to open approximately 2,200 restaurants.

The Company expects to open about 600 restaurants in the U.S.

and International Operated Markets, and that developmental licensees and affiliates will contribute capital towards about 1,600 restaurant openings in their respective markets.

The Company expects nearly 1,800 net restaurant additions in 2025.

• The Company expects to achieve a free cash flow conversion rate in the low-to-mid 80% range.

Recent Accounting Pronouncements

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Generally speaking, any statement in this report not based upon historical fact is a forward-looking statement.

Forward-looking statements can also be identified by the use of forward-looking or conditional words, such as “could,” “should,” “can,” “continue,” “estimate,” “forecast,” “intend,” “look,” “may,” “will,” “expect,” “believe,” “anticipate,” “plan,” “remain,” “confident,” “commit,” “enable” and “potential” or similar expressions.

Forward-looking statements can also be identified by the use of forward-looking or conditional words, such as “could,” “should,” “can,” “continue,” “aim,” “estimate,” “forecast,” “intend,” “look,” “may,” “will,” “expect,” “believe,” “anticipate,” “plan,” “remain,” “confident,” “commit,” “enable,” “potential” and “trajectory” or similar expressions.

In particular, statements regarding our plans, strategies, prospects and expectations regarding our business and industry are forward-looking statements.

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You should not rely unduly on forward-looking statements.

Our business results are subject to a variety of risks, including those that are described below and elsewhere in our filings with the SEC.

Our business results are subject to a variety of risks, including those that are described below and elsewhere in our filings with the

The risks described below are not the only risks we face.

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For example, nutritional, health, environmental and other scientific studies and conclusions, which continuously evolve and may have contradictory implications, drive popular opinion, litigation and regulation (including initiatives intended to drive consumer behavior) in ways that affect the “informal eating out” (“IEO”) segment or perceptions of our brand, generally or relative to available alternatives.

Our business could also be impacted by business incidents or practices, whether actual or perceived, particularly if they receive considerable publicity or result in litigation, as well as by our position or perceived lack of position on environmental, social responsibility, public policy, geopolitical and similar matters.

Our business could also be impacted by business incidents or practices, whether actual or perceived, particularly if they receive considerable publicity or result in litigation or governmental investigations or proceedings, as well as by our perceived position or lack of position on environmental, social responsibility, public policy, geopolitical and similar matters.

In addition, we cannot ensure that franchisees or business partners will not take actions that adversely affect the value and relevance of our brand.

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We also face sustained, intense competition from traditional, fast casual and other competitors, which may include many non-traditional market participants such as convenience stores, grocery stores, coffee shops and online retailers.

We expect our environment to continue to be highly competitive, and our results in any particular reporting period may be impacted by a contracting IEO segment or by new or continuing actions, product offerings, technologies or consolidation of our competitors and third-party partners, which may have a short- or long-term impact on our results.

We expect our environment to continue to be highly competitive and our results in any particular reporting period may be impacted by a contracting IEO segment or by new or continuing actions, product offerings, technologies or consolidation of our competitors and third-party partners, which may have short- and long-term impacts on our results.

We compete primarily on the basis of product choice, quality, affordability, service and location.

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In particular, we may be involved in intellectual property claims, including often aggressive or opportunistic attempts to enforce patents used in information technology systems, which might affect our operations and results.

Any claim of infringement, whether

or not it has merit, could, particularly in rapidly evolving areas, be time consuming, or result in costly litigation and could also have an adverse impact on our business.

Any claim of infringement, whether or not it has merit, could, particularly in rapidly evolving areas, be time consuming, or result in costly litigation and could also have an adverse impact on our business.

In addition, we cannot ensure that franchisees and other third parties who hold licenses to our intellectual property will not take actions that adversely affect the value of our intellectual property.

The global scope of our business subjects us to risks that could negatively affect our business.

We encounter differing cultural, regulatory, geopolitical and economic environments within and among the more than 100 countries where McDonald’s restaurants operate, and our ability to achieve our business objectives depends on the System’s success in these environments.

We encounter differing and evolving cultural, regulatory, geopolitical and economic environments within and among the more than 100 countries where McDonald’s restaurants operate, and our ability to achieve our business objectives depends on the System’s success in these environments.

Meeting customer expectations is complicated by the risks inherent in our global operating environment, and our global success is partially dependent on our System’s ability to leverage operating successes across markets and brand perceptions.

Planned initiatives may not have appeal across multiple markets with McDonald’s customers and could drive unanticipated changes in customer perceptions and negatively impact our business results.

Disruptions in operations or price volatility in a market can also result from governmental actions, such as price, foreign exchange or trade-related tariffs or controls, trade policies and regulations, sanctions and counter sanctions, government-mandated closure of our, our franchisees’ or our suppliers’ operations, and asset seizures.

Such disruptions or volatility can also result from acts of war, terrorism or other hostilities.

The broader impact of acts of war and related sanctions, including on macroeconomic conditions, geopolitical tensions, consumer demand and the ability of us and our franchisees to operate in certain geographic areas, may also have an adverse impact on our business and financial results.

Disruptions in operations or price volatility in a market can also result from governmental actions (whether proposed or realized, unilateral or bilateral), such as price, foreign exchange or trade-related tariffs or controls, trade policies and regulations, sanctions and counter sanctions, government-mandated closure of our, our franchisees’ or our suppliers’ operations, and asset seizures.

Some or all of the above-referenced disruptions or volatility can also result from acts of war, terrorism or other hostilities.

Such governmental actions may have a broader impact on macroeconomic conditions, geopolitical tensions, anti-American sentiment, consumer demand and the ability of us and our franchisees to operate in certain geographic areas, which in turn may have an adverse impact on our business and financial results.

While we may face challenges and uncertainties in any of the markets in which we operate, such challenges and uncertainties are often heightened in developing markets, which may entail a relatively higher risk of political instability, economic volatility, crime, corruption and social and ethnic unrest.

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We depend on the effectiveness of our supply chain management to assure a reliable and sufficient supply of quality products, equipment and other materials on favorable terms.

Although many of these items are sourced from a wide variety of suppliers in countries around the world, certain items have limited suppliers, which may increase our reliance on those suppliers.

Although many of these items are sourced from a wide variety of suppliers in countries around the world, certain items have limited suppliers, which increases our reliance on those suppliers.

Supply chain interruptions and related price increases have in the past and may in the future adversely affect us as well as our suppliers and franchisees, whose performance may have a significant impact on our results.

Such interruptions and price increases could be caused by shortages, inflationary pressures, unexpected increases in demand, transportation-related issues, labor-related issues, technology-related issues, weather-related events, natural disasters, acts of war, terrorism or other hostilities, or other factors beyond the control of us or our suppliers or franchisees.

Interruptions in our System’s supply chain or ineffective contingency planning can increase our costs and/or limit the availability of products, equipment and other materials that are critical to our System’s operations or to restaurant development.

Such interruptions and price increases could be caused by shortages, inflationary pressures, tariffs, unexpected increases in demand, transportation-related issues, labor-related issues, technology-related issues, weather-related events, natural disasters, acts of war, terrorism or other hostilities, or other factors beyond our control or that of our suppliers or franchisees.

Interruptions in our System’s supply chain or ineffective contingency planning can increase our costs, impact ingredient quality, delay new restaurant openings, and/or limit the quality or availability of products, equipment and other materials that are critical to our System’s operations or to restaurant development.

Our franchise business model presents a number of risks.

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fees from franchised restaurants (e.g., rent and royalties based on a percentage of sales) and, to a lesser degree, sales from Company-owned and operated restaurants.

Our franchisees and developmental licensees manage their businesses independently and therefore are responsible for the day-to-day operation of their restaurants.

Our franchisees manage their businesses independently and therefore are responsible for the day-to-day operation of their restaurants.

The revenues we realize from franchised restaurants are largely dependent on the ability of our franchisees to grow their sales.

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If franchisee sales trends worsen, or any of such risks materialize or intensify, our financial results could be negatively affected, which may be material.

Our success also relies on the willingness and ability of our independent franchisees and affiliates to implement major initiatives, which may include financial investment, and to remain aligned with us on operating, value/promotional and capital-intensive reinvestment plans.

Our success also relies on the willingness and ability of our franchisees and affiliates to implement major initiatives, which may include financial investment, and to remain aligned with us on operating, value/promotional and capital-intensive reinvestment plans.

The ability of franchisees to contribute to the achievement of our plans is dependent in large part on the availability to them of funding at reasonable interest rates and may be negatively impacted by the financial markets in general, by their or our creditworthiness or by banks’ lending practices.

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The decision to own restaurants or to operate under franchise or license agreements is driven by many factors whose interrelationship is complex.

The benefits of our more heavily franchised structure

depend on various factors, including whether we have effectively selected franchisees, licensees and/or affiliates that meet our rigorous standards, whether we are able to successfully integrate them into our structure and whether their performance and the resulting ownership mix supports our brand and financial objectives.

The benefits of our more heavily franchised structure depend on various factors, including whether we have effectively selected franchisees, licensees and/or affiliates that meet our rigorous

standards, whether we are able to successfully integrate them into our structure and whether their performance and the resulting ownership mix supports our brand and financial objectives.

Continued challenges with respect to labor, including availability and cost, could adversely impact our business and results of operations.

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Food safety is a top priority, and we dedicate substantial resources aimed at ensuring that our customers enjoy safe food products, including as our menu and service model evolve.

However, food safety events, including instances of food-borne illness, occur within the food industry and our System from time to time and could occur in the future.

For example, in October 2024, certain U.S.

regulatory agencies announced that they were investigating a multistate outbreak of E.

coli impacting our System.

However, food safety events, including instances of food-borne illness, have occurred within the food industry and our System from time to time and could occur in the future.

Instances of food tampering, food contamination or food-borne illness, whether actual or perceived, could adversely affect our brand, reputation and financial results.

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Information technology system failures or interruptions, or breaches of network security, may impact our operations or cause reputational harm.

We are increasingly reliant upon technology systems, such as point-of-sale, that support our business operations, including our digital and delivery solutions, and technologies that facilitate communication and collaboration with affiliated entities, customers, employees, franchisees, suppliers, service providers or other independent third parties to conduct our business, whether developed and

maintained by us or provided by third parties.

Any failure or interruption of these systems could significantly impact our or our franchisees’ operations, or our customers’ experiences and perceptions.

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Our increasing reliance on third-party systems also subjects us to risks faced by those third-party businesses, including operational, security and credit risks.

Further, the technology systems of third parties upon which we rely to conduct our business could be compromised in a manner that adversely affects us and our technology systems and business continuity.

Further, the technology systems of third parties upon which we rely to conduct our business could be compromised in a manner that adversely affects us and our technology systems, information and business continuity.

If technology systems were to fail or otherwise be unavailable, or if business continuity or disaster recovery plans were not effective, and we were unable to recover in a timely manner, we could experience an interruption in our or our franchisees’ operations.

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Health epidemics or pandemics have in the past and may in the future impact macroeconomic conditions, consumer behavior, labor availability and supply chain management, as well as local operations in impacted markets, all of which can adversely affect our business, financial results and outlook.

Governmental responses to health epidemics or pandemics, including operational restrictions, can also affect the foregoing items and adversely affect our business and financial results.

Governmental responses to health epidemics or pandemics, including operational restrictions and temporary restaurant closures, can also affect the foregoing items and adversely affect our business and financial results.

The duration and scope of a health epidemic or pandemic can be difficult to predict and depends on many factors, including the emergence of new variants and the availability, acceptance and effectiveness of preventative measures.

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The commodity markets for some of the ingredients we use, such as beef and chicken, are particularly volatile due to factors such as seasonal shifts, climate conditions, industry demand and other macroeconomic conditions, international commodity markets, food safety concerns, product recalls, government regulation, and acts of war, terrorism or other hostilities, all of which are beyond our control and, in many instances, unpredictable.

Our System can only partially address future price risk through hedging and other activities, and therefore increases in commodity costs could have an adverse impact on our profitability.

Our System can only partially address future

price risk through hedging and other activities, and therefore increases in commodity costs could have an adverse impact on our profitability.

A decrease in our credit ratings or an increase in our funding costs could adversely affect our profitability.

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In addition, we are engaging in social impact initiatives, including community engagement and philanthropy;

as well as diversity, equity and inclusion efforts.

as well as our commitment to inclusion.

We have faced increased scrutiny related to reporting on and achieving these initiatives, as well as continued public focus on similar matters, such as packaging and waste, animal health and welfare, deforestation and land use.

We have also experienced increased pressure from stakeholders to provide expanded disclosure and establish additional commitments, targets or goals, and take actions to meet them, which could expose us to additional market, operational, execution and reputational costs and risks.

Moreover, addressing environmental and social impact matters requires Systemwide as well as

third party coordination and alignment, over which we do not have complete control and which may be unpredictable.

Moreover, addressing environmental and social impact matters requires Systemwide as well as third party coordination and alignment, over which we do not have complete control and which may be unpredictable.

The standards by which certain environmental and social impact matters are measured are also evolving and subject to assumptions that could change over time.

Events such as severe weather conditions, natural disasters, hostilities, social and geopolitical unrest and climate change, among others, can adversely affect our results and prospects.

Severe weather conditions, natural disasters, acts of war, terrorism or other hostilities, social and geopolitical unrest or climate change (or expectations about them) can adversely affect consumer behavior and confidence levels, supply availability and costs and local operations in impacted markets, all of which can affect our results and prospects.

Climate change may also increase the frequency and severity of weather-related events and natural disasters.

Severe weather conditions, natural disasters, acts of war, terrorism or other hostilities, social and geopolitical unrest, including anti-American sentiment, and climate change (or expectations or uncertainty about them) can adversely affect consumer confidence levels and behavior, supply availability and costs and local operations, including temporary restaurant closures and delayed new restaurant openings, in impacted markets, all of which can affect our results and prospects.

Climate change may also increase the frequency and severity of

weather-related events and natural disasters.

Our receipt of proceeds under any insurance we maintain with respect to some of these risks may be delayed or the proceeds may be insufficient to cover our losses fully.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis