Can McDonald's Stock Reclaim Its All-Time High as Rising Prices Weigh on Consumers?

McDonald's (NYSE: MCD) faces an uphill battle as inflation continues to squeeze more people's wallets. Investors are privy to this detail, with the dividend stock down by more than 20% this year.

The situation has pressured McDonald's over the past five years, and it also puts the stock roughly $100 below its 52-week high. Some investors view dips as buying opportunities, but that may not be the case for McDonald's.

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McDonald's doesn't have much pricing power

McDonald's built an iconic fast food restaurant chain by catering to consumers who want cheap food. When that cheap food gets more expensive, it's easier for consumers to consider alternatives, and rising prices have created more tension amid broad inflation.

Low-income consumers have been pulling back on McDonald's purchases. This segment saw a double-digit year-over-year drop in 2025 and also decreased this year.

The glaring red flag is that second-quarter comparable sales only increased by 0.8% year-over-year in the U.S., which is the company's largest market. Meanwhile, the Consumer Price Index increased by 3.4% year-over-year.

McDonald's comparable sales growth is not keeping up with inflation, and with comparable sales from international operated markets up by 1.5% year-over-year, the company has limited options to reignite growth.

Price hikes aren't a good option when McDonald's caters to lower-income consumers and has used low prices as a major selling point for many years. Furthermore, operating income only inched up by 3% year-over-year, showing that the company has limited options for boosting its profit margins.

Franchisees are feeling the pain

McDonald's doesn't just sell fast food. It also buys real estate and leases some of its locations to franchisees. Those franchisees either pay monthly rent or a percentage of sales.

This business model was a key reason McDonald's became the most recognizable fast food restaurant chain. However, those same store owners are facing sharply rising costs amid sluggish growth rates.

McDonald's acknowledged this is an issue upon announcing its NEXT initiative. Part of this strategy includes providing $5 billion to franchisees through 2030, "through a combination of rent relief and capital support."

That's more than half of McDonald's full-year profits, which will be distributed through 2030. It's also part of a larger $8.5 billion commitment through 2036.

A survey from the National Owners Association found that 95% of franchisees reported declining year-over-year profitability in Q1, with nearly universal agreement that McDonald's current plan for increasing cash flow is not working.

Approximately 80% of survey respondents said their cash flow is "not sufficient to support required reinvestment obligations."

It's no wonder McDonald's announced its NEXT initiative, which looks more like a preservation mission than a long-term growth opportunity. If operators continue to feel the pinch and have long-term doubts, they may look for an exit, and the 0.8% boost in U.S. comparable sales may not be enticing enough for aspiring franchisees to do business with McDonald's.

Marc Guberti 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.