The Franchisee Is the CustomerWide moat

The corporation's largest revenue line is money paid to it by the people who run its restaurants: $16.5 billion of franchised revenue in 2025 — royalties on sales plus rent on property — against $9.7 billion from company-operated restaurants¹, in a system about 95% franchised.

As a customer relationship this is close to ideal, and worth being precise about why. The customer supplies the capital, hires the staff, takes the operating risk and pays McDonald's a percentage of revenue regardless of whether the restaurant is profitable. The customer also cannot easily leave: the franchise agreement runs for decades, the building usually belongs to McDonald's, and the operator's entire net worth is generally invested in the restaurants.

The corresponding obligation is that McDonald's has to keep those customers successful, because a franchisee who cannot make money stops reinvesting, stops opening restaurants and eventually becomes a political problem. The tension that produces has its own root threat; what matters here is that the relationship only works while both sides prosper.

Watch franchised revenue growth against systemwide sales growth. Franchised revenue growing faster means McDonald's is taking a larger share of the system's economics — profitable in the short run, and precisely the dynamic that strains the relationship the whole model depends on.