McDonald's Refranchises Corporate Stores: Margins Fall Behind

McDonald's is reassessing the balance between its company-owned and franchised restaurants after reporting disappointing performance from its corporate-operated locations during its Q1 earnings call.

Chief Financial Officer Ian Borden said margins at company-owned U.S. stores were “not acceptable,” prompting leadership to consider refranchising some units. That would transfer ownership to franchisees who may be better positioned to operate them efficiently.

“If we can’t deliver that, I know we’ve got a lot of great owner-operators in the U.S. or around the world that can run those restaurants well and generate strong outcomes for either themselves or for the overall business,” Borden said.

The performance gap appears to be driven in part by strategic decisions within company-owned stores, including higher labor investments and more conservative pricing, which have pressured margins.

At the same time, the broader system is facing economic pressures. Franchisees themselves are dealing with tighter cash flow due to inflation and rising commodity costs, particularly for key ingredients like beef. Despite this, McDonald’s leadership expressed confidence in the overall financial health of the system, citing strong balance sheets, supply chain advantages and hedging strategies that should help manage inflation through 2026.