How quickly can U.S. execution, operations, and marketing issues be addressed, and what does that imply for the U.S. sales trajectory in the current macro environment?

Operations improvements are expected fastest due to internal control over deployment cadence. Marketing changes for Q3 are limited, but Q4 adjustments are being explored, with full recovery by 2027. Value fixes require ongoing franchisee conversations, with updates expected by Investor Day. Ian Borden added that digital offers are being relaunched, and marketing dollars reallocated to proven value. U.S. comp sales were slightly negative in July, but IOM and IDL comp sales are expected to accelerate sequentially in Q3. “I think as you've heard Chris talk about, it's going to take a moment for those actions to start delivering impact.”

What was the reason for lower franchisee participation in the EDAP program, and how will the company ensure better alignment going forward?

Chris Kempczinski explained that the 'under $3' structure of the EDAP menu allowed more pricing flexibility, leading about one-third of the system to take higher prices. This was exacerbated by the pullback on digital offers. Management is addressing this through education, showing performance differences between compliant and non-compliant restaurants, and incorporating pricing execution into business reviews, which affect franchisee growth and eligibility. He emphasized strong alignment with franchisees on value leadership despite the Q2 execution miss. “So what we're talking about here is, call it, 1/3 of the system that did not execute against what we were guiding around in terms of our [ EDAP ] menu.”

Could the accelerated pace of restaurant growth negatively impact same-store sales due to cannibalization or resource redirection? Also, how has McDonald's marketing approach changed given past underperformance?

Ian Borden clarified that the slight adjustment to the development pace (50,000 restaurants by 2028 vs. 2027) was due to inflationary costs and the consumer environment, not cannibalization, and is not expected to meaningfully impact comps. Chris Kempczinski discussed the evolution of marketing from a 'we tell the customer' model to a 'customer's brand' approach, emphasizing engagement with creators and influencers. He highlighted a strategic shift towards driving long-term baseline growth through emphasizing experience and food quality, rather than over-relying on 'borrowed equities' for cultural moments. “It's actually evolving to something different because the world is changing and we need to change with it.”

MCD

MCDONALDS (MCD) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Consumer Discretionary· Aug 4, 2026

Source: earnings call transcript

Executive summary

McDonald's Q2 FY26 — U.S. Underperforms Amidst Execution Challenges, International Strength Continues

McDonald's Q2 FY26 results were mixed, with strong international performance offset by U.S. comparable sales growth below expectations. Management attributed U.S. underperformance to inconsistent execution of value offerings, overwhelmed restaurant operations, and ineffective marketing, leading to a "bad trade" that negatively impacted loyal customers. The company is acting with urgency to address these issues, while also advancing its "McDonald's Next" strategy for long-term growth and efficiency.

Highlights

System-wide sales grew 4% in constant currency, reflecting the growing contribution from new unit openings.
Global comparable sales grew 1.3%, with positive comparable sales growth across each of our operating segments.
International Operated Markets (IOM) comparable sales increased 1.5%, driven by strong performance in Germany, Australia, and the U.K.
International Developmental Licensed Markets (IDL) comparable sales increased 1.9%, led by Japan's tenth consecutive quarter of positive comparable guest count growth.
Adjusted earnings per share reached $3.38, representing a 5% increase versus the prior year on a constant currency basis.

Concerns

U.S. comparable sales grew only 0.8%, below expectations, due to inconsistent execution and marketing underperformance.
Only 60%-65% of the U.S. system consistently executed the new 'under $3 everyday affordable price (EDAP)' menu, leading to lower incrementality than expected.
Restaurant teams were overwhelmed by too many deployments in the quarter, impacting customer service times and satisfaction scores.
Marketing programs, including the FIFA campaign, did not deliver against expectations.
The target to reach 50,000 restaurants globally was pushed out from the end of 2027 to 2028 due to the pressured consumer environment and cumulative inflationary impact on development costs.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year 2026 Adjusted EPS Foreign Currency Translation Impact	$0.15 tailwind medium materiality	FY26	Medium
Full-year 2026 G&A as % of System-Wide Sales	about 2.2% low materiality	FY26	High
Target to Reach Global Restaurant Count	50,000 restaurants high materiality	by 2028	Medium
Gross Restaurant Openings	about 2,600 medium materiality	by end of 2026 · FY26	High
G&A Percentage Spend	lower low materiality	in 2027	Medium
IOM Comparable Sales Growth	accelerate sequentially medium materiality	Q3 · FY26	High
IDL Comparable Sales Growth	accelerate sequentially medium materiality	Q3 · FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Global Global comparable sales grew 1.3%, with positive growth across all operating segments. System-wide sales grew 4% in constant currency, reflecting new unit openings. System-wide sales growth (constant currency): 4%First half system-wide sales growth (constant currency): 5%First half global comparable sales increase: 2.5%	—	1.3%	—	—
U.S. Comparable sales grew 0.8% for the quarter, below expectations, due to inconsistent execution of the EDAP menu and marketing underperformance. Performance was slightly negative in July. First half comparable sales growth: 2.3%	—	0.8%	—	—
International Operated Markets (IOM) Comparable sales increased 1.5%, driven by strong execution in Germany, Australia, and the U.K. Performance improved over the balance of the quarter after a slightly negative April. France's performance fell short of expectations. Key markets driving growth: Germany, Australia, U.K.Chicken share gained: Australia and Germany	—	1.5%	—	—
International Developmental Licensed Markets (IDL) Comparable sales increased 1.9%, led by Japan's strong execution and loyalty platform. Growth was tempered by results in China, where the macro environment remains challenging. Japan positive comparable guest count growth: 10th consecutive quarterJapan 90-day active loyalty users: nearly 20 million	—	1.9%	—	—

Product announcements

Product	Type	Timeline	Details
Red Bull Energizers	expansion	coming weeks
McDonald's Next Training Program	launch	October 5

Risks & headwinds

Challenging Consumer Environment Q2 FY26

QSR industry traffic in several largest markets flat to negative

Mitigation:Adjusting value offerings, reallocating marketing dollars, simplifying operations.

Inconsistent U.S. Execution of EDAP Menu Q2 FY26

Only 60%-65% of system executing recommended pricing; 2/3 of Q2 underperformance related to 'bad trade' of EDAP and digital offers

Mitigation:Launching national digital flash offers, targeting loyal users with personalized offers, reallocating marketing dollars to proven value offerings, addressing non-compliance through education and business reviews.

Restaurant Teams Overwhelmed by Deployments Q2 FY26

Impacted customer service times and satisfaction scores

Mitigation:Simplifying restaurant operations by eliminating non-customer-facing activities over the remainder of the year.

China Macro Environment near term

Tempered IDL comparable sales growth

Inflationary Development Costs current

Cumulative impact on development costs

Mitigation:Slightly adjusting the pace of restaurant growth, pushing out the 50,000 restaurant target to 2028.

FX Translation Impact on EPS FY26

Full-year 2026 adjusted EPS tailwind reduced from $0.20-$0.30 to $0.15

What to watch in Q3 FY26

U.S. EDAP Menu Execution & Awareness

next quarter

Current 60%-65% system compliance, low awareness

Target Improved compliance and consumer awareness, positive impact on traffic

Why it matters

Inconsistent execution and low awareness of the EDAP menu contributed significantly to U.S. underperformance in Q2.

Part of that was due to the fact that we're getting really inconsistent execution, only about call it, 60% to 65% of our system is currently executing the recommended pricing architecture with the 10 items for under and the other thing that was an issue is we didn't get the awareness that we needed when we launched that 10 items for under $3.

Find out whether MCD delivers this. Inve re-checks your case every morning.

Q&A highlights

Clarify the statement that value and affordability leadership has been restored, given U.S. underperformance, and discuss the role of value menu construction and marketing.

Management stated that base menu pricing, $5 meal deals, and Extra Value Meals (EVMs) have significantly improved value perception, leading to an ~8-point improvement in value/affordability scores. However, the new 'under $3 EDAP menu' underperformed due to inconsistent execution (only 60-65% system compliance) and low awareness. This was compounded by pulling back on digital offers and 'Buy 1 Get 1' promotions, which negatively impacted loyal customers and accounted for about two-thirds of the Q2 miss. The company is working to fix this 'bad trade' with franchisee alignment.

“So the net-net of that is there was a fairly significant amount of price that got taken in Q2 as a result of those two moves.”

asked by David Palmer · answered by Christopher Kempczinski

3 min read 6 chapters

Detailed narrative

Accelerating the Arches Strategy Success

The 'Accelerating the Arches' strategy, launched almost six years ago, has successfully driven system-wide sales growth of roughly $40 billion and operating income by over $3 billion. This was achieved by maximizing marketing, committing to the iconic core menu, and doubling down on the 4Ds (digital, delivery, drive-thru, and development).

The company has built the industry's largest customer platform with nearly 120 million active loyalty users and grown delivery to over $20 billion in annual system-wide sales.

U.S. Performance Challenges and Immediate Actions

U.S. comparable sales grew only 0.8% in Q2, significantly below expectations, after a slow start in April. This underperformance was primarily attributed to inconsistent execution of the new 'under $3 everyday affordable price (EDAP) menu' (with only 60-65% system compliance) and lower consumer awareness.

The situation was compounded by a pullback on digital offers and the 'Buy 1 Get 1 for a dollar' program, which negatively impacted loyal customers and accounted for about two-thirds of the traffic underperformance. Immediate actions include launching national digital flash offers, targeting loyal users with personalized offers, and reallocating marketing dollars to proven value offerings like extra value meals.

International Market Resilience and Innovation

International Operated Markets (IOM) saw comparable sales increase 1.5%, driven by strong execution in Germany, Australia, and the U.K., which effectively leveraged value, menu innovation (especially chicken), and creative marketing. International Developmental Licensed Markets (IDL) comparable sales increased 1.9%, with Japan leading due to its successful loyalty platform.

Menu innovation, such as Australia's Korean barbecue LTO and Germany's specialty beverage platform, continued to drive growth, though China's macro environment remains challenging.

Operational Simplification and Calendar Scrutiny

Restaurant operations worsened in Q2 as teams were overwhelmed by too many complicated deployments, leading to increased service times and decreased customer satisfaction. Management is addressing this by simplifying restaurant operations, eliminating several non-customer-facing activities for the remainder of the year, and applying scrutiny to the marketing calendar.

The goal is to ensure a manageable cadence of deployments that allows restaurant crews to focus on delivering a great customer experience.

McDonald's Next Strategy for Long-Term Growth

The company introduced 'McDonald's Next,' a new growth strategy with the ambition to be more customers' first choice, focusing on improving food taste and quality, engaging fans, and simplifying restaurants for better hospitality. This strategy is expected to be meaningfully self-funded by productivity opportunities within company and franchisee P&Ls, along with strong top-line growth.

Over 90% of owner-operators are energized by the growth and productivity opportunities presented by 'McDonald's Next,' which will be detailed further at Investor Day in September.

U.S. Leadership Transition and Experience

Sky Anderson has been appointed the new President of McDonald's U.S., effective immediately, completing a planned transition. With 26 years of experience across finance, operations, and market leadership, including as Chief Operating Officer of McDonald's USA, Sky brings a strong track record of business judgment and operational discipline.

Her past achievements include driving over 30% comparable sales growth and increasing average restaurant unit cash flow by $100,000 in the U.S. West Zone. Joe Erlinger, the outgoing President, is leaving after more than two decades with the system.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.