# McDonald's commits $8.5 billion to franchisee modernization Fast-food giant's decade-long overhaul targets better food, service and efficiency - **Source:** [Financial Post - Top Stories](https://financialpost.com/) - **Published:** 2026-09-24 - **Topic:** [Business](https://brifing.si/c/business) - **Original article:** - **On Brifing:** https://brifing.si/s/8bfb3c1c-4378-41fb-952b-28ec9d7d7ace ## Massive franchisee support package McDonald's is allocating $8.5 billion through 2036 to help franchisees modernize stores, improve food quality and service. The funds combine capital support and rent relief, with franchisees expected to invest over $1 million per location on average. This comes as franchisees face rising costs for beef, labor and equipment. The assistance aims to offset part of these upgrade costs for the chain's 44,000 franchised locations, representing 95% of its global footprint. ## Industry-wide pressures mount The announcement follows Wendy's largest franchisee declaring bankruptcy, highlighting fast-food sector strains. McDonald's shares dropped 4.8% to 2022 lows, with year-to-date decline reaching 22%. CFO Ian Borden warned of slightly negative U.S. sales in Q3, continuing slower-than-expected growth. CEO Chris Kempczinski noted flat industry traffic amid persistent inflation, emphasizing market share gains as key to growth. The chain faces competition from chicken-focused brands and a resurgent Burger King. ## Next initiative specifics McDonald's 'Next' program aims to transform restaurants beyond cheap meals through open designs and playful elements. Kitchen streamlining targets $100,000 annual savings per U.S. location via efficiency gains. The plan includes better staff training, customer greetings, and personalized marketing like breakfast rewards. Technology plays a key role with ArchIQ AI system and expanded drive-thru automation tests. These changes address earlier missteps with overwhelming product launches and ineffective promotions. ## Chicken and beverage push McDonald's targets 1.5 percentage point market share gains in chicken and beverages by 2030. Currently holding high-teens share in chicken and single-digits in drinks, it plans grilled chicken sandwiches, wraps and hand-breaded options. As the global #2 in coffee, it's responding to competitors like Raising Cane's and 7 Brew. The $30 billion chicken market represents a key battleground. The chain also develops options for GLP-1 drug users, who currently favor McNuggets and Filet-O-Fish. ## Operational improvements Starting October 5, McDonald's will implement new hospitality training and food standards. Cooking procedure changes roll out by 2024. The company simplifies its marketing calendar, focusing on proven offers like Extra Value Meals after promotional misfires. A new U.S. leadership team brings 'focus and urgency' to the home market. These operational tweaks complement the larger 'Next' transformation strategy for long-term competitiveness. ## Financial targets McDonald's projects new restaurants will contribute 2.5% to sales growth in 2027, moderating to 2% by 2030. It targets operating margins in the low-to-mid 50% range and free cash flow conversion in the mid-to-high 80% range by 2030. Franchisees expect minimum 20% returns on modernization investments, with corporate targeting high teens. The company delayed its 50,000-restaurant goal to 2028 due to construction costs and demand slowdowns, pushing back the original 2027 target. ## Franchise economics McDonald's U.S. model typically involves company-owned real estate with franchisees paying rent plus royalties. CFO Borden asserts franchisees can fund investments through current cash flows, corporate support and productivity savings, noting their cash flow remains industry-leading despite pressures. The $8.5 billion commitment represents a 'put your money where your mouth is' approach to achieving targeted returns for both franchisees and corporate over the 10-year horizon. ## Strategic implications McDonald's comprehensive overhaul addresses multiple challenges: competitive pressures, operational inefficiencies, and changing consumer preferences. The scale of investment reflects the urgency to maintain dominance amid sector consolidation. By aligning franchisee incentives with corporate goals through substantial financial support, McDonald's aims to transform its business model while navigating inflationary pressures and shifting fast-food dynamics. Success hinges on executing this complex, multi-year transition. ## Sources covering this story - https://financialpost.com/news/retail-marketing/mcdonalds-offers-85-billion-help-owners-pay-overhaul — --- _Summary written by Brifing from the original reporting. Copyright in the original article belongs to its publisher; read the full piece at the link above._