Looking at McDonald’s stock, everything is going just fine. Shares have gained 18% over the past year, right in line with the Standard & Poor’s 500 index. They have more than tripled over the past decade, topping the broad market during a strong bull run; including dividends, shareholders have actually quadrupled their money over that period.
The multiple to earnings investors are willing to pay has expanded as well, and now sits well above levels seen for most of this century. That’s due in part to the company’s re-franchising strategy (profits from franchising a restaurant are valued more highly than those made actually running a restaurant), but at the very least investors seem optimistic that the company, and the stock, can keep heading in the right direction.
And yet to look at the business, the outlook appears much less certain. In 2024, same-restaurant sales (which include both company-owned and franchised locations) rose just 0.2% year-over-year. In the first quarter of this year, the figure was negative 3.6%; Wall Street analysts projected a drop of just 1%.
As the Wall Street Journal noted last week, McDonald’s has “lost its value edge”, and that’s not just the perception of a single outlet: a year ago, CEO Chris Kempczinski admitted on an earnings call that “our value leadership gap has recently shrunk”. As the Journal noted, the response from corporate – including a $5 meal deal quickly copied by other QSR chains – has been met with frustration by franchisees, who are dealing with increasing costs around labor and product.
As far as consumers are concerned, the efforts haven’t really worked: a survey by investment bank UBS, cited by the Journal, noted that the percentage of respondents who saw McDonald’s as “a good value” had fallen to its lowest point in a decade. To add to the pressure, in May the company closed its CosMcs spin-off chain.
Will the Golden Arches Shine Again?
Those factors seem to suggest that investors are being complacent, and perhaps ignoring very real near- and mid-term risks to the business. But, to be fair, the news is probably not quite as bad as headlines might suggest.
For one, the company’s same-restaurant sales are impacted by an extremely difficult comparison. McDonald’s sales had roared in the first few years of the decade, rising over 30% between 2019 and 2023. Obviously, inflation was a tailwind (and a huge benefit to corporate profits, which are based largely on revenue; costs are borne mostly by franchisees), but even relative to other fast-food giants the chain clearly outperformed.
Frustrations about pricing are widespread at this point; the head of McDonald’s USA even wrote an open letter to customers last year in response to viral criticisms (including that of a Big Mac meal that cost $18, at a rest stop in Connecticut).
At a time when many consumers believe that everything is simply too expensive, it’s not a surprise that the perception of McDonald’s value leadership has changed.
Meanwhile, Kempczinski’s admission last year that the company had lost its value focus was correct – Chili’s turned its entire business around by basically matching McDonald’s prices — but that admission also means the company is focused on returning to the low-cost position that has made it the largest chain in the country. The CosMcs closure is not necessarily a surprise or a sign of failure: management had said it wanted to try new beverages and new offerings in a separate concept to keep from disrupting existing restaurants. The learnings from those efforts seem substantial: the company now is trialing CosMcs-developed beverages in a number of locations.
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There is a path for McDonald’s to return to targeted, successful, promotions, control pricing, and potentially offer some innovation around product. (The return of the Snack Wrap seems a step in that direction.) And history likely gives investors some confidence in that strategy.
After all, this isn’t the first time observers have questioned whether McDonald’s decades-long dominance is coming to an end. In the mid-2010s, the business seemed to be in real trouble.
In the fourth quarter of 2015, sales fell 7% year-over-year; profits plunged more than 20%. CEO Don Thompson exited just days later. His replacement, Steve Easterbrook, launched the popular All Day Breakfast, but even with a boost from the new options traffic declined in 2016 for the fourth consecutive year.
Amid a greater focus by consumers on health and freshness, and rising competition from fast casual leaders like Chipotle, McDonald’s seemed at risk of being left behind. Franchisees then weren’t happy, either (a bigger risk given a big part of Easterbrook’s strategy was to sell company-owned restaurants). In a survey taken in late 2016, one franchisee grumbled that “we are discounting almost everything…it’s all about top-line sales, not running profitable restaurants”. In a complaint that could easily be repeated today, another franchisee reported that “the cost of doing business continues to rise, from the outside as well as McDonald’s initiatives.”
The concerns in 2015 and 2016 don’t sound very different from those surrounding McDonald’s in 2025 and (presumably) 2026. A decade ago, the risks didn’t play out: investors who stuck with McDonald’s gained some 300%. Most investors probably don’t expect the same kind of returns over the next ten years, but that history does provide a strong reason not to panic.
McDonald’s has faced challenges before; the skeptics have always been proven wrong. At least for now, the market expects history will repeat.
Vince Martin is an analyst and author whose work has appeared on multiple financial industry websites for more than a decade; he’s currently the lead writer for Wall Street & Main. He has no positions in any companies mentioned.
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