Krispy Kreme vs. McDonald's: Which Restaurant Stock Is a Better Buy in 2026?

Choosing between growth potential and established stability is a classic investor dilemma. Today, we compare Krispy Kreme (NASDAQ:DNUT) and McDonald's (NYSE:MCD) to determine which food giant is the better buy.

Krispy Kreme is working to transform from a traditional doughnut shop into a global sweet-treat brand with high accessibility. McDonald's remains the world's leading fast-food chain, leveraging immense scale to maintain its market share. Both companies are navigating shifting consumer habits and supply chain pressures in the current economic environment.

The case for Krispy Kreme

Krispy Kreme operates a Hub and Spoke model, producing fresh doughnuts at larger shops and delivering them daily to thousands of grocery and retail locations. The company manages a critical distribution partnership with BakeMark USA, which handles supplies for most of North America. This strategy aims to maximize the brand's presence without the overhead of building full-service kitchens in every neighborhood.

In its 2025 fiscal year (FY), revenue reached $1.5 billion, representing a decline of 8.6% compared to the prior year. The company reported a net loss of $515.8 million during this period. The net margin, which reveals the percentage of revenue remaining after all costs, was -33.9%, reflecting a challenging year for the brand's bottom line among food stocks.

As of its December 2025 balance sheet, the debt-to-equity ratio was 2.2x. This ratio measures total debt against shareholder equity, suggesting the company relies significantly on borrowed funds. The current ratio, which compares short-term assets to short-term liabilities, was 0.4x. Free cash flow, or the cash left after capital projects, was negative $64 million. Note that stock-based compensation (SBC) represented 37.9% of operating cash flow, which inflates reported cash generation since SBC is a non-cash expense added back in the cash flow statement.

The case for McDonald's

McDonald's serves millions of customers daily across 114 countries, primarily through its network of over 45,000 restaurants. The business model leans heavily on franchisees, who operate the vast majority of these locations and pay royalties to the parent company. While its 70-year partnership with The Coca-Cola Company remains iconic, the company has recently explored new beverage options to keep its menu relevant.

For FY 2025, the company generated revenue of $26.9 billion, a growth of 3.7% over the previous year. Net income for the period was $8.6 billion. The net margin remained robust at 31.9%, indicating the company's ability to retain a significant portion of its sales as profit even while facing higher ingredient and labor costs.

On its December 2025 balance sheet, the debt-to-equity ratio was -30.6x, indicating that total liabilities exceed shareholder equity. This is due to the company’s strategy of prioritizing returns to investors, using profits to fund stock buybacks, which artificially reduces shareholder equity. The current ratio, which shows the ability to cover immediate debts, was 1.0x. McDonald's generated significant free cash flow of $7.2 billion in FY 2025. This cash provides the company with ample resources to fund dividends, buy back shares, or invest in new digital ordering technologies.

Risk profile comparison

Krispy Kreme faces risks from cybersecurity vulnerabilities, following recent data breaches that led to legal settlements. The company also deals with supply chain concentration, as it depends on a single vendor for its glaze flavoring and a primary distributor for North America. High financial leverage and a dependency on third-party franchisees to execute its capital-light strategy add further complexity. Competition from other beverage and snack providers like Starbucks remains a constant pressure on its growth goals.

McDonald's is currently managing litigation risks, including class-action lawsuits regarding food safety and product claims. The company is also under scrutiny for labor practices and regulatory compliance involving teenage employees in certain markets. Potential volatility in its long-term supply alliances, particularly if foundational partnerships shift, could disrupt operations. Furthermore, the company faces intense competition from rivals such as Restaurant Brands International, who are aggressively pursuing value-oriented customers.

Valuation comparison

McDonald's appears more attractively valued on an earnings basis, while Krispy Kreme trades at a much lower multiple of its annual sales.

Sector benchmark uses the SPDR XLP sector ETF. Valuation metrics sourced from Financial Modeling Prep (FMP) and may differ from other data providers.

Which stock would I buy in 2026?

Digging into Krispy Kreme and McDonald's reveals the better stock to buy is the latter. Krispy Kreme may look more attractive from a valuation perspective, given its much lower price-to-sales ratio, but there’s a reason why its sales multiple is so low.

Krispy Kreme had a partnership with McDonald's that ended in 2025, driving the donut company’s stock price down. Moreover, it amassed huge debt on its balance sheet. It exited its fiscal first quarter, ended March 29, with nearly $900 million in debt.

Krispy Kreme’s sales are in decline, since it decided to close unprofitable stores. This strategy helped it reduce costs, but it still resulted in a fiscal Q1 net loss of $22.7 million. The company is in turnaround mode as it works to strengthen its financial health.

McDonald's is a large, profitable business with rising sales. In the first quarter, it posted 9% year-over-year revenue growth to $6.5 billion. Its Q1 net income increased 6% year over year to nearly $2 billion. Given that McDonald's is the stronger operation, it’s a better investment than Krispy Kreme right now.

Robert Izquierdo has positions in Coca-Cola and Starbucks. The Motley Fool has positions in and recommends Starbucks. The Motley Fool recommends Restaurant Brands International and recommends the following options: long January 2028 $320 calls on McDonald's and short January 2028 $340 calls on McDonald's. The Motley Fool has a disclosure policy.