Ryan Werneburg ’26 pitched McDonald’s Corporation (NYSE: MCD) on March 30, 2026. McDonald’s is not simply a restaurant company; it is fundamentally a real estate and royalty business that owns or controls land and buildings at the majority of its franchised locations, collecting both rent and royalty income on sales across a 45,000-location global system.
Ryan’s investment thesis is built on four core pillars: a durable franchise and real estate moat, Dividend Aristocrat status, a market-leading digital loyalty ecosystem, and defensive global diversification.
First, with about 95% of locations franchised, McDonald’s bears virtually no food, labor, or operating risk at the store level while generating a ~47% operating margin, among the highest in the Consumer Discretionary sector. The franchise model produces deeply predictable, recurring cash flows and unmatched supplier leverage that no competitor can replicate.
Second, McDonald’s has raised its dividend for 47+ consecutive years through every major dislocation — 2008, COVID-19, and the 2022 rate shock. At ~$7.60 annualized and a ~2.5% yield, it offers meaningful income with mid-to-high single-digit dividend growth. Its 0.53 beta makes it a paid-to-wait, defensive anchor for the SMIF portfolio.
Third, McDonald’s has built the QSR industry’s most scaled loyalty program: ~210 million active 90-day users across 70 markets, $37 billion in loyalty sales, growing 20% year-over-year. Higher visit frequency and average check among loyalty members creates a structural mix-shift benefit as digital penetration grows — a data advantage competitors are years behind replicating.
Fourth, only ~35% of revenues come from the U.S., insulating McDonald’s from single-market downturns. International Operated Markets grew +5.2% in Q4 2025. In downturns, consumers trade down from casual dining to QSR, further benefiting traffic while McDonald’s maintains pricing power and free cash flow generation. This provides defensive exposure within SMIF’s holdings in XLY.
SMIF voted to establish a long position in McDonald’s Corporation of about $25,000, funded through the partial sale of Booking and Amazon.
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