International Developmental Licensed & CorporateNarrow moat

McDonald's (MCD) — moat facet

The purest royalty business McDonald's has, with the head office's costs stacked on top of it.

The third segment holds most of the growth and shows almost none of the profit. In 2025 International Developmental Licensed Markets & Corporate had revenue of $2,427 million and operating income of $203 million 1, a margin of 8.4% 2. It had 20,805 restaurants 3, 46% of the system 4.

Licensed-and-Corporate segment, 2025 ($m)$1,897mFranchised margins$1,682mSegment SG&A$203mOperating incomeMcDonald's Form 10-K FY2025, segment note and franchised margins
Nearly $1.9bn of royalty margin, mostly spent on the head office booked in the same segment.

Two unlike things share the line. The first is the licensed markets, where a licensee or affiliate owns and runs the restaurants and the real estate, and pays McDonald's a royalty. The segment includes equity method investments in China and Japan and was 99% franchised at the end of 2025 5. Franchised sales were $35,289 million and franchised revenue $1,898 million 6, about 5.4 cents per dollar of sales 7. Because McDonald's owns no property here, occupancy costs were $1 million and franchised margins $1,897 million 8. That is almost pure profit. The second is Corporate: the segment carried $1,682 million of selling, general and administrative expense in 2025 9, most of the company's head-office cost. Subtract it and the $1.9 billion of royalties becomes $203 million.

The history is a deliberate retreat from ownership. In 2017 McDonald's sold its businesses in China and Hong Kong for a pre-tax gain of $850 million 10, and the segment's revenue fell from $3,698 million in 2017 to $1,852 million in 2018 on the basis reported then 11. On the restated basis it went from $1,881.5 million in 2019 12 to $2,661 million in 2024 13, and then fell to $2,427 million in 2025 as company-operated sales halved to $443 million 14, the result of further refranchising.

Restaurant growth is where this segment leads. It had 18,102 restaurants at the end of 2023, 20,805 at the end of 2025 15 and 21,341 by June 2026, 8,114 of them in China and 3,038 in Japan 16. Systemwide sales grew 10% in 2025 17, and comparable sales rose 9.4% in 2023, fell 0.3% in 2024 and rose 4.6% in 2025 18. In the June 2026 quarter they rose 1.9%, led by Japan, with China negative 19.

The latest quarter shows the Corporate half working against the licensed half. Revenue rose to $669 million from $600 million, but selling, general and administrative expense rose to $479 million from $377 million, and operating income fell to $42 million from $70 million 20. Capital spending in the segment was $103 million in the quarter 21.

Judged by its reported margin, this looks like the weakest segment; judged by its franchised margin, it is the purest royalty business McDonald's has. The risk is concentration: China is 38% of the segment's restaurants 22 and was the one negative market it named in June 2026. The number that decides the verdict is franchised margin growth against corporate SG&A: royalties rising faster than head-office cost, and the reported margin finally shows what the restaurants earn.

Moat trajectory: Holding steady

Restaurants grew 15% in two years while operating income fell to $42m in the June 2026 quarter.

The number that tests this moat
Reported
Licensed-and-Corporate operating income, latest quarter
$42m in Q2 2026, from $70m

Royalties from over 21,000 restaurants are being absorbed by head-office cost; a rising figure means the royalties are winning.

Source: McDonald's Form 10-Q, Q2 2026 ↗
References
  1. ReportedIn 2025 International Developmental Licensed Markets & Corporate had revenue of $2,427 million and operating income of $203 million , a margin of 8.4% .
    McDonald's Form 10-K FY2025 - segment note (revenue, operating income, SG&A, assets and capital expenditures by segment, 2023-2025); franchised and company-operated revenues, franchised margins and franchised sales by segment; comparable sales and restaurants by segment — FY2023-FY2025 · publ. February 2026 · source ↗
  2. Moat Explorer calcIn 2025 International Developmental Licensed Markets & Corporate had revenue of $2,427 million and operating income of $203 million , a margin of 8.4% .
    Moat Explorer calculation from McDonald's Forms 10-K FY2019-FY2025 and Q2 2026 filings: segment shares, margins, growth rates and franchised revenue per dollar of franchised sales — FY2019 to Q2 2026 · publ. 2026-09-23 · source ↗
  3. ReportedIt had 20,805 restaurants , 46% of the system .
    McDonald's Form 10-K FY2025 - segment note (revenue, operating income, SG&A, assets and capital expenditures by segment, 2023-2025); franchised and company-operated revenues, franchised margins and franchised sales by segment; comparable sales and restaurants by segment — FY2023-FY2025 · publ. February 2026 · source ↗
  4. Moat Explorer calcIt had 20,805 restaurants , 46% of the system .
    Moat Explorer calculation from McDonald's Forms 10-K FY2019-FY2025 and Q2 2026 filings: segment shares, margins, growth rates and franchised revenue per dollar of franchised sales — FY2019 to Q2 2026 · publ. 2026-09-23 · source ↗
  5. ReportedThe segment includes equity method investments in China and Japan and was 99% franchised at the end of 2025 .
    McDonald's Form 10-K FY2025 - segment note (revenue, operating income, SG&A, assets and capital expenditures by segment, 2023-2025); franchised and company-operated revenues, franchised margins and franchised sales by segment; comparable sales and restaurants by segment — FY2023-FY2025 · publ. February 2026 · source ↗
  6. ReportedFranchised sales were $35,289 million and franchised revenue $1,898 million , about 5.4 cents per dollar of sales .
    McDonald's Form 10-K FY2025 - segment note (revenue, operating income, SG&A, assets and capital expenditures by segment, 2023-2025); franchised and company-operated revenues, franchised margins and franchised sales by segment; comparable sales and restaurants by segment — FY2023-FY2025 · publ. February 2026 · source ↗
  7. Moat Explorer calcFranchised sales were $35,289 million and franchised revenue $1,898 million , about 5.4 cents per dollar of sales .
    Moat Explorer calculation from McDonald's Forms 10-K FY2019-FY2025 and Q2 2026 filings: segment shares, margins, growth rates and franchised revenue per dollar of franchised sales — FY2019 to Q2 2026 · publ. 2026-09-23 · source ↗
  8. ReportedBecause McDonald's owns no property here, occupancy costs were $1 million and franchised margins $1,897 million .
    McDonald's Form 10-K FY2025 - segment note (revenue, operating income, SG&A, assets and capital expenditures by segment, 2023-2025); franchised and company-operated revenues, franchised margins and franchised sales by segment; comparable sales and restaurants by segment — FY2023-FY2025 · publ. February 2026 · source ↗
  9. ReportedThe second is Corporate: the segment carried $1,682 million of selling, general and administrative expense in 2025 , most of the company's head-office cost.
    McDonald's Form 10-K FY2025 - segment note (revenue, operating income, SG&A, assets and capital expenditures by segment, 2023-2025); franchised and company-operated revenues, franchised margins and franchised sales by segment; comparable sales and restaurants by segment — FY2023-FY2025 · publ. February 2026 · source ↗
  10. ReportedIn 2017 McDonald's sold its businesses in China and Hong Kong for a pre-tax gain of $850 million , and the segment's revenue fell from $3,698 million in 2017 to $1,852 million in 2018 on the basis reported then .
    McDonald's Form 10-K FY2019 - revenues by segment 2017-2019 as reported then; $850 million pre-tax gain on the sale of the China and Hong Kong businesses in 2017 — FY2017-FY2019 · publ. February 2020 · source ↗
  11. ReportedIn 2017 McDonald's sold its businesses in China and Hong Kong for a pre-tax gain of $850 million , and the segment's revenue fell from $3,698 million in 2017 to $1,852 million in 2018 on the basis reported then .
    McDonald's Form 10-K FY2019 - revenues by segment 2017-2019 as reported then; $850 million pre-tax gain on the sale of the China and Hong Kong businesses in 2017 — FY2017-FY2019 · publ. February 2020 · source ↗
  12. ReportedOn the restated basis it went from $1,881.5 million in 2019 to $2,661 million in 2024 , and then fell to $2,427 million in 2025 as company-operated sales halved to $443 million , the result of further refranchising.
    McDonald's Form 10-K FY2021 - segment note, revenue and operating income by segment 2019-2021 (restated basis) — FY2019-FY2021 · publ. February 2022 · source ↗
  13. ReportedOn the restated basis it went from $1,881.5 million in 2019 to $2,661 million in 2024 , and then fell to $2,427 million in 2025 as company-operated sales halved to $443 million , the result of further refranchising.
    McDonald's Form 10-K FY2025 - segment note (revenue, operating income, SG&A, assets and capital expenditures by segment, 2023-2025); franchised and company-operated revenues, franchised margins and franchised sales by segment; comparable sales and restaurants by segment — FY2023-FY2025 · publ. February 2026 · source ↗
  14. ReportedOn the restated basis it went from $1,881.5 million in 2019 to $2,661 million in 2024 , and then fell to $2,427 million in 2025 as company-operated sales halved to $443 million , the result of further refranchising.
    McDonald's Form 10-K FY2025 - segment note (revenue, operating income, SG&A, assets and capital expenditures by segment, 2023-2025); franchised and company-operated revenues, franchised margins and franchised sales by segment; comparable sales and restaurants by segment — FY2023-FY2025 · publ. February 2026 · source ↗
  15. ReportedIt had 18,102 restaurants at the end of 2023, 20,805 at the end of 2025 and 21,341 by June 2026, 8,114 of them in China and 3,038 in Japan .
    McDonald's Form 10-K FY2025 - segment note (revenue, operating income, SG&A, assets and capital expenditures by segment, 2023-2025); franchised and company-operated revenues, franchised margins and franchised sales by segment; comparable sales and restaurants by segment — FY2023-FY2025 · publ. February 2026 · source ↗
  16. ReportedIt had 18,102 restaurants at the end of 2023, 20,805 at the end of 2025 and 21,341 by June 2026, 8,114 of them in China and 3,038 in Japan .
    McDonald's Q2 2026 financial supplement (8-K exhibit 99.2) - restaurants by segment and market at 30 June 2026 — Q2 2026 · publ. 4 August 2026 · source ↗
  17. ReportedSystemwide sales grew 10% in 2025 , and comparable sales rose 9.4% in 2023, fell 0.3% in 2024 and rose 4.6% in 2025 .
    McDonald's Form 10-K FY2025 - segment note (revenue, operating income, SG&A, assets and capital expenditures by segment, 2023-2025); franchised and company-operated revenues, franchised margins and franchised sales by segment; comparable sales and restaurants by segment — FY2023-FY2025 · publ. February 2026 · source ↗
  18. ReportedSystemwide sales grew 10% in 2025 , and comparable sales rose 9.4% in 2023, fell 0.3% in 2024 and rose 4.6% in 2025 .
    McDonald's Form 10-K FY2025 - segment note (revenue, operating income, SG&A, assets and capital expenditures by segment, 2023-2025); franchised and company-operated revenues, franchised margins and franchised sales by segment; comparable sales and restaurants by segment — FY2023-FY2025 · publ. February 2026 · source ↗
  19. ReportedIn the June 2026 quarter they rose 1.9%, led by Japan, with China negative .
    McDonald's Q2 2026 results release (8-K exhibit 99.1) - comparable sales by segment and their drivers — Q2 2026 · publ. 4 August 2026 · source ↗
  20. ReportedRevenue rose to $669 million from $600 million, but selling, general and administrative expense rose to $479 million from $377 million, and operating income fell to $42 million from $70 million .
    McDonald's Form 10-Q, quarter ended 30 June 2026 - segment revenue, SG&A, operating income and capital expenditures for Q2 and H1 2026 — Q2 2026 · publ. August 2026 · source ↗
  21. ReportedCapital spending in the segment was $103 million in the quarter .
    McDonald's Form 10-Q, quarter ended 30 June 2026 - segment revenue, SG&A, operating income and capital expenditures for Q2 and H1 2026 — Q2 2026 · publ. August 2026 · source ↗
  22. Moat Explorer calcThe risk is concentration: China is 38% of the segment's restaurants and was the one negative market it named in June 2026.
    Moat Explorer calculation from McDonald's Forms 10-K FY2019-FY2025 and Q2 2026 filings: segment shares, margins, growth rates and franchised revenue per dollar of franchised sales — FY2019 to Q2 2026 · publ. 2026-09-23 · source ↗
Sources
Generated September 23, 2026