Here's How McDonald's Actually Makes Money

McDonald's Corporation (NYSE: MCD) is a quintessential representation of American culture, helping make the company a global phenomenon with over 45,000 stores in more than 100 countries.

The stock has created generational wealth, turning a $10,000 investment in 1970 into more than $5.7 million today.

But understanding how McDonald's actually makes money is crucial to tracing its past success and dissecting why McDonald's stock still likely has a bright future ahead.

Image source: Getty Images.

Despite feeding more than 68 million people each day, McDonald's isn't raking in the profits from burgers and fries

McDonald's is primarily a franchise business. It purchases the land and buildings, then leases them to franchisees, who pay for equipment, furnishings, and other operating costs. Franchisees also pay a combination of rent and royalties on their sales in perpetuity.Approximately 95% of McDonald's locations operate as franchises.

It makes McDonald's an asset-light business with a high return on invested capital. In other words, the company is very efficient at generating returns on the capital it invests in the business.

MCD Return on Invested Capital data by YCharts.

McDonald's becomes increasingly profitable as it expands, because the relative cost of opening a new location shrinks as more locations generate greater franchise revenue. As a result, McDonald's has steadily increased its net profit margin over the years.

Why McDonald's can continue to deliver for investors

An efficient business only goes so far if it can't grow. Although McDonald's is already one of the largest restaurant chains in the world, there is still room to open more restaurants. McDonald's opened 2,275 new locations last year, and plans to open 2,600 more in 2026. Management hopes to bring its global restaurant base to approximately 50,000 by the end of 2027.

McDonald's is also on the inside track with consumers in the current economic environment. In times like now, when many people are struggling financially, cost leaders tend to capture value as customers migrate to cheaper products and services. McDonald's reported 5.7% comparable sales growth in the fourth quarter of 2025, driven in part by increased guest counts.

The company's appeal to consumers as a value leader, its name recognition, and the rinse-and-repeat franchise expansion model continue to produce durable growth. It has made the stock a renowned dividend stock with nearly five decades of uninterrupted annual increases.

McDonald's stock won't make you rich overnight. But it can over the long term, and there's no reason to believe that won't continue.

Justin Pope has no position in any of the stocks mentioned. The Motley Fool 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.