McDonald's Corporation (MCD) Earnings Call Transcript & Summary

Please welcome Vice President of Investor Relations, Dexter Congbalay.

Good morning, and welcome to McDonald's 2026 Investor Day. Thank you to everyone for joining us, whether here at our headquarters in Chicago or via our live stream. Just a couple of housekeeping items before we get started. As many of you are aware, we issued a press release this morning summarizing highlights from today's presentation. We'll post key slides from the presentation on our website. Also, please note that the forward-looking statements in our press release and 8-K filing also apply to our comments in the presentation today. Those documents will be available on our website as well reconciliations of non-GAAP financial measures in today's presentation, along with their corresponding GAAP measures. Now -- this morning, we'll take you through our strategy to drive growth and productivity. We'll then close out our webcast with a Q&A session. And with that, we're ready to begin. [music]

Please welcome McDonald's Chairman and CEO, Chris Kempczinski.

Good morning, everyone. On behalf of the global senior leadership team, welcome to McDonald's Investor Day. We've got an exciting day planned. I also hope you're hungry. We're going to start this morning in Chicago at our headquarters. We're Speedy Labs, our Global Innovation Center, tested and validated many of the ideas you're going to hear about today. During lunch, our guests joining in person will taste new and upgraded menu items. And afterwards, we're going to head to a top secret warehouse location to show you the McDonald's restaurant of the future. We'll end the day back here at our headquarters with the reception featuring some of our key leaders from around the world. Throughout it all, you'll be hearing about McDonald's Next. Our plan to unlock the next chapter of growth and productivity to drive system and shareholder returns, a strategic plan to further separate McDonald's from the rest of the industry. We've set our ambitions high because McDonald's is a company like no other. Every day, we serve more than 70 million customers. Our menu is iconic, reflected by our $17 billion brands. Nearly 220 million customers regularly use our app and participate in our loyalty program, making it one of the largest in the world. This provides us with more data and better insights than anyone else an asset particularly valuable for training new AI capabilities. We have unrivaled buying power across our supply chain, and of course, our financial strength enables us to make big bets. After more than 70 years, the McDonald's brand has remained as vibrant as ever, and as you'll hear today, our opportunities are massive. Our founder, Ray Kroc, he had a great line, which captured the restless ambition of our system. If you're not green and growing, you're ripe and routing. We're at a point -- and that mindset has shaped McDonald's for generations. We never stood still and today is no different. That's exactly what we've done throughout our history. But to understand where we're going, it's important to reflect on where we've been. 6 years ago, in 2020, we launched Accelerating the Arches. The strategy was born out of the challenges and opportunities posed by the global COVID pandemic, along with conditions unique to McDonald's. We focused our system on our 3 growth pillars: our MCDs, as we called them. First was to maximize our marketing, we own 1 of the world's most valuable brands. And we saw a big opportunity to better connect our branded culture, which we did through highly successful campaigns like Famous orders and partnerships like Minecraft. Second was to commit to our core menu. This would simplify operations and recenter our marketing investment against our most beloved equities. Since we made that commitment, we've grown core menu sales more than 50% and in the U.S. gained significant share in beef and chicken. And third was to double down on the 4 Ds of drive-through, delivery, digital and development. We anticipated that customers would increasingly favor takeaway service channels and the phone would become the starting point for more orders. And today, sales initiated on the phone represent about 40% of total system-wide sales across our top 5 markets. And after years of limited new restaurant growth in our own markets, we also saw the opportunity to accelerate our pace to fill in seams, where we were underpenetrated. Since then, we've added more than 6,000 restaurants, the fastest pace in our history with more to come on our way to 50,000 restaurants. The strategy work and shareholders were rewarded. McDonald's stock has outperformed our peers with less risk than the sector overall. And even as we stepped up our investment in the business, we continued to return significant cash to shareholders. Since 2020, we've delivered $24 billion in dividends and $14 billion in share repurchases. Few companies offer McDonald's combination of growth, stability and cash returns. It's our secret sauce and one we guard zealously. But beyond the headline numbers, something else was happening inside of McDonald's, arguably something even more profound. We were transforming the company for our digital-first future. Internally, our mantra was perform and transform. Our legacy technology infrastructure was outdated and efficient and unstable. Hundreds of finance and HR systems every country and a own app, data puddles instead of data lakes, Technology wasn't an enabler. It was a handicap. So 2 is our structure, business functions, including menu, restaurant design, pricing analytics, indirect procurement and consumer insights were all decentralized. We've done the hard work to restructure our company and establish on McDonald's way of operating to better leverage our size and scale. This includes common technology platforms a single enterprise data foundation, operating systems and capabilities that can be deployed across more than 46,000 restaurants. That enables us to identify opportunities faster test emergerously and deploy what works more efficiently. That's just one example of how we can use our unmet scale as a competitive weapon, which brings us to McDonald's Next. The advantages and capabilities that we've built along with our financial strength, position us to grow in the areas of greatest opportunity at a time when customer expectations are once again shifting and industry dynamics will remain challenging. Customers want value, but they also want great taste and quality. Marketing is becoming more personal more participatory and more driven by direct customer relationships. With new service channels, restaurants are becoming more complex to run, and AI is changing how businesses operate and customers engage. At the same time, the industry growth algorithm is changing. We expect industry traffic growth in our wholly-owned markets will be flat, while inflation remains elevated. For McDonald's to succeed in that environment, growth must come from capturing greater share. As you drive traffic, you get operating leverage and margins grow, but you can't count on traffic alone to drive margin expansion. It must also come from operating more productively. The winners will be the companies that create more demand and deliver it more efficiently. That makes 2 priorities critical to generating strong shareholder returns, share gains and productivity. We must be the first choice for more customers more often. And to create the capacity to keep investing behind that growth, we need to unlock new levels of productivity across the system. That's McDonald's next. Growth and productivity 2 sides of the same coin. We will elevate the taste, quality and customer experience to earn more First Choice visits. More First Choice visits, create guest count growth. higher guest counts and greater productivity together improves restaurant economics. Stronger economics create the capacity to reinvest and reinvestment makes the next turn of McDonald's growth and productivity engine stronger. Our ability to make that engine stronger comes from our scale. And the 4 pillars of NEXT each leverage the power of our scale to capture opportunities a few others can match. Menu NEXT creates more reasons to choose McDonald's. Our focus is tasting quality across the categories with the greatest opportunity, chicken, beverages and beef. We'll elevate the menu choices customers already love innovate where we see unmet demand and leverage newly built category capabilities to earn share. The outcome is stronger preference, more first choice visits and guest count growth. Importantly, as we elevate our focus on taste and quality, value remains foundational, great value and great taste are not competing ideas. Customers expect both and will deliver it. Consumer NEXT turns that preference into more demand through loyalty, personalization, partnerships and a deeper understanding of our customers will build increase frequency and create demand that drives more visits over time. Restaurant NEXT catalyzes growth and fuels productivity, by simplifying operations, modernizing restaurant design and deploying AI-enabled tools at scale will improve execution, strengthen restaurant economics and unlock restaurant level efficiency. And people NEXT turns our people advantage into hospitality at scale. Better train, better equipped teams create better customer experiences. Hospitality and better customer experiences, strengthen preference drive repeat visits and reinforce our growth and productivity engine. Across all 4 pillars, AI serves as an accelerator, helps us understand customer behavior, innovate faster simplify operations and make better decisions at scale. Bringing McDonald's NEXT to life across our system requires a shared commitment to the customer experience. We call it Make-Golden. It's our multiyear system-wide commitment to elevate the customer experience through great food and great hospitality that are uniquely McDonald's. Calls on every supplier, franchisee and employee to make each visit worthy of the Golden Arches. Throughout the day, you'll see how Make a Golden supports growth and productivity across our strategy. And McDonald's NEXT will be deployed with discipline. Some improvements can begin now through stronger execution. Others will build this technology, restaurant readiness and economic support them. We'll sequence the work by market with a clear focus on franchisee capacity and returns. We've spent the last 6 years building new capabilities, now it's time to put them to work. The industry is changing. The companies that will win will be the ones that create more demand and deliver it more efficiently. We believe McDonald's is built for that environment. Our scale gives us better insights, stronger economics and the ability to deploy what works faster and more effectively than anyone else in the industry. And that's what our strategy is designed to do. Make McDonald's the first toys for more customers more often and turn that choice into higher guest counts, stronger restaurant economics and long-term shareholder value. Let me close with highlights of our McDonald's next commitment. Over the next few years, you'll see the biggest upgrade to the taste and quality of our menu in McDonald's history, driving 1.5 share points of gain in both chicken and beverages, while maintaining our strong leadership in Beef. You'll see us deliver about 250 basis points of gross restaurant level efficiency as McDonald's next elements are deployed across our wholly owned markets. And you'll see operating margins reach the low to mid-50% range by 2030. Throughout the day, we'll show you exactly how we intend to do this. For those joining in person will follow the live stream program with rotations that go deeper into the capabilities and experiences behind NEXT. The last chapter was about strengthening McDonald's and building new capabilities. The NEXT chapter is about putting those capabilities to work, using our scale to create more demand using productivity to create greater capacity to invest and making McDonald's the first choice for more customers more often. That's McDonald's next. To begin, I'll hand it over to our Global Chief Restaurant Experience Officer, Jill McDonald, to show how menu next will create more reasons for customers to choose McDonald's. Jill?

Thanks, Chris, and it's great to be with all of you today. Since 2020, our focus on our $17 billion equities has helped grow sales of our iconic core menu by more than 50% to almost $90 billion. and we see more opportunity ahead. We compete in 3 categories that account for the vast majority of our business, beef, chicken and beverages. And in 2025, across our top 10 markets, in aggregate, these categories in the informal eating out sector remain sizable and growing. We are global leaders by a wide margin in beef with more than 40% share in a $50 billion category that is growing around 3% a year. Chicken is a nearly $130 billion category, growing more than 5% a year. We have a high teens market share and are category leaders in most of our largest markets. And beverage is a nearly $230 billion category, growing faster than the overall Informa eating-out market, and we have share in the high single digits. We are the second largest coffee player globally. One category where we've led for decades, two where we don't yet have our fair share, all 3 are growing. Now Menu NEXT is our share gain strategy to capture that growth. Taste and quality are 2 of the top 3 drivers of customer choice. And when perceptions improve, share follows. For example, a 5-point increase in customer perception of great tasting chicken translates to more than 0.5 point of share gain in chicken. Improving taste and quality is a meaningful driver of growth. Just over a year ago, we put specialized category teams behind beverages, chicken and beef, each owning insights menu, operations, supply chain and marketing behind 1 objective: category growth from being the first choice for more customers and 2 plans run through each category. Gold standard execution elevates the iconic equities, millions of customers already love to unlock their full potential. Menu innovation adds new occasions, new choices and more reasons to visit. Now let's start with chicken. It's the fastest-growing category in -- we have strong foundations of equities that we're leveraging as growth platforms. Chicken McNuggets represents nearly $15 billion in annual system-wide sales the McCrispy platform, more than GBP 2.5 billion and limit chicken nearly $4 billion. Now let me tell you about how we'll make our more than $30 billion global chicken business even bigger. First, gold standard chicken applies what we've learned from billions of servings to make our chicken even better. That includes small sounding changes such as optimizing cook times calibrating prior settings and adjusting oil volumes, changes that when applied across our scale, have a significant impact. Deployment of gold standard chicken across our top 6 markets has begun and will be complete in 2027. Second, we're expanding our strongest chicken platforms. A significant portion of our chicken headroom sits in pieces. Starting with Chicken McNuggets, a platform that has grown nearly 40% over the last 5 years. We'll build on that momentum by expanding the platform through new flavors signature sauces, product extensions and cultural activations. Third, we're innovating to expand our presence across more chicken categories. We'll build on the momentum of McCrispy by continuing to introduce new options of our McCrispy sandwich, scaling the strips made with a new recipe already deployed in the U.S. extending the successful wings platform into additional markets and introducing grilled chicken sandwiches and wraps to meet growing demand for high protein options. And you'll hear more from Skye about that in just a few minutes. Fourth is hand reading, a significant opportunity to upgrade taste and quality. Across 10,000 restaurants in Asia, we have built meaningful expertise in hand-breaded chicken, in China and Malaysia, we are now the market leader for great tasting chicken under growing chicken sales and share. Taking learnings from these international development licensed market -- we have been operationally piloting a hand-breaded chicken portfolio in a handful of restaurants in Chicago land. Customer feedback has been fantastic with double-digit increases in chicken taste and quality scores, and we are now expanding hand-breaded chicken to more pilots supported with advertising in both the U.S. and Ireland in 2027. Together, these efforts will drive more First Choice occasions, guest counts and drive about 1.5 points of share growth in chicken by 2030. Energy, through learnings from COSMIC, the rigor of advertised sales tests and deployments in these new beverage spaces that are now live across nearly 18,000 restaurants we've built, validated and scaled a new multiyear growth platform. These great tasting new beverages, combined with McDonald's unbeatable speed, value, convenience and our loved food is proving to be a compelling customer proposition. Beverages are no longer just an add-on, but a reason to visit. More than half of beverage-led visits come after lunch, opening an incremental occasion for McDonald's at the time of day where restaurants have higher capacity. Average check is approximately 50% higher because people are pairing fries or a burger with their drink. We see high repurchase intent and improved perception of McDonald's having a wide range of great tasting beverages. Sustaining volumes are due in part to customers exploring the entire range of loyalty members who purchased a specialty beverage in the first 6 weeks, nearly half returned for a specialty beverage from a different subcategory by week 12 across all markets. And it's high margin, and it's coupled with low complexity, which our restaurant teams have embraced. Importantly, these drinks are overindexing with Gen Z giving the next generation more reasons to visit McDonald's. Let me tell you how we're going to build on that momentum. First, we'll continue expanding the platform through new flavors and recipes and we'll also keep scaling to more restaurants including most markets in Europe in the first half of 2027 and expansion across more international development licensed markets throughout 2027. Second, we know for many customers, a First Choice occasion starts with a great cup of coffee. Gold Standard Coffee focuses on enhancing the taste of all 8 million cups of coffee we serve a day through fresher beans, new recipes and upgraded equipment. New espresso machines in the U.S. will give customers more ways to personalize their coffee, including alternative milk choices. Gold Standard Coffee will be deployed in most of the international operated markets by the end of this year and continue to deploy in China, the U.S. and additional markets in 2027. Together, expanding our beverage platforms and elevating our coffee experience will earn our status as the first choice for more of our customers around the world, which will drive more guest counts. And that's I will add about 1.5 points in beverage share by 2030. Now let's talk about beef, which 70 years later, remains at the heart of our brand. We have $4 billion beef assets. Big Mac, Cortana, McDouble and the Big Tasty with generations of customer trust and loyalty, and we are building the next big equity with big Arch. Our opportunity is turning these equities into even bigger growth engines and extending that strength into large burgers, the fastest-growing subcategory. First, Gold standard beef builds on the success of Best burger, which drove a 1% to 2% lift in sales in the U.S. 6 months after it launched. We're now making great execution easier and more consistent across the system with updated procedures and a new dedicated training program starting in 2027. Second, as we already have in the U.S., we are exploring fresh beef Quarter Pounder patties and hot off the grill preparation in more markets. Third, we're looking to add more choice in beef for those seeking more flexibility in portion sizes, for example, a burger bar. And fourth, we're leveraging the full potential of our $5.5 billion quarter equity and expanding in large burgers with big arch and double Quarter Pounder. Now the Quarter Pounder consistently outperforms the competition in the U.S. on value for money and repurchase intent. And Australia shows what's possible when we make Quarter Pounder at the center of innovation and marketing. There, QPC contributed more than 5% of sales in the initial launch window significantly outperforming previous beef LTOs, which contributed closer to 1% of sales. We've seen the strongest results when we invest consistently behind Quarter Pounder through taste and quality, relevant innovation and sustained marketing support. We plan to share a broader pantry of QPC innovations across markets along with greater freedom to develop locally relevant flavor and variety extensions. As customers move for a single to a double QPC strengthens average spend and creates a natural pathway into large burgers. We are leveraging our global system to accelerate double QPC innovation, and bringing new recipes to extend the big Arch platform, which has delivered lifts to sales and higher guest counts upon launch, strengthening our ability to win more first choices in large burgers. We already lead the world in burgers. Together, these moves will strengthen preference, increase frequency and earn us more first choice occasions across the category and that's how we maintain our market-leading share in beef. Now to tell you more about how we're future-proofing our menu, I'm going to turn it over to President of McDonald's U.S.A. Skye Anderson.

Thanks, Jill. It's great to be here with all of you today. Over the last several months, I've invested a lot of time back in our U.S. restaurants from Sacramento to New York City to Omaha and Dallas, there is tremendous belief in this brand and our future, but there's also a recognition that winning requires us to be more focused, disciplined and faster. And that's why I keep coming back to 2 simple questions. How does this serve our customers better? And how does this help our restaurants win? Our delicious food is a big part of what made McDonald's famous in the first place. And while there's so much our customers love, we are falling short when it comes to consistent execution. We're tackling that challenge head on, and that means active conversations with owner operators, suppliers and employees about what's working and what's not. Dedicated taste and quality training and removing distractions at the restaurant level, so our crew can execute every order to the gold standard. At the same time, you'll see us put greater emphasis behind the care and preparation of the food itself in our marketing. Our ambition is to strengthen the core reasons customers choose McDonald's in the first place and build the kind of sustainable baseline growth that creates long-term value. And that's an approach we'll take with new innovation to future-proof our menu. We're strengthening our category plans and making deliberate investments in the things our customers value most. We've been closely monitoring adoption, behavior shifts and many preferences including the rise of GLP-1 medications. In the U.S., approximately 10% of adults use GLP-1s. And of those households with GLP-1 users, guess how many visit McDonald's 84%. Let me say that again, 84% of households with GLP-1 users visit McDonald's. This is an opportunity. We don't need to win a new base of customers into McDonald's. Instead, we need to keep giving them more reasons to make McDonald's their first choice as their eating habits evolve. They want more protein greater portion flexibility and through that leaves them feeling satisfied without feeling like too much. Our menu already gives customers built in choice. They can choose the protein, the portion and the format that fits the moment. And we see that reflected in behavior. Households or GLP-1 users are increasingly choosing some of our strongest equities, including Chicken McNuggets, for layer fish and happy meals that combine protein and portion flexibility. This trend extends beyond GLP-1 users, way beyond. So while there's roughly 30 million GLP-1 users in the U.S. today, there are nearly 16 million Americans who are actively seeking more protein in their diet. That broader protein-seeking audience creates a much larger growth opportunity. McDonald's has a strong right to win in protein-led categories, including grilled chicken, chicken bowls protein for with breakfast and snack wraps. And our approach is balanced. Taste led protein forward innovation with disciplined deployment. All calibrated to minimize complexity in our restaurants. We're exploring balls, grow chicken and egg bites to expand protein forward options across breakfast, lunch and denom. Such opportunities bring together what these customers want most, great taste, the protein they're seeking and flexibility. So you'll all get to taste and learn more about some of these uniquely McDonald's solutions at our rotations later today. We already have the customers. We already have the protein credentials portion flexibility and scale to set us up to win as taste change. Now we're building on those advantages to create more reasons to visit McDonald's more often. I'm going to turn it back over to Jill to close out many NEXT.

Thanks, Skye. New gold standard moves across chicken, beef and coffee, further elevating our $1 billion equities. Expanding our chicken portfolio deploying pneumo crispy strips and bringing McWings to more markets, adding interest and relevance to Chicken McNuggets with new flavors and sources and bringing hand-breaded chicken to more markets beyond Asia. A baseline building Neumacafe beverage platform now scaling globally, new recipes, flavors and line extensions for QPC, double QPC and big Arch. And more protein options in beef, chicken and beverages with greater for portion flexibility, all led by specialized teams obsessed with growth in our largest categories. And when we combine taste with McDonald's advantages in value, convenience, speed and scale, we drive more first choice visits for more customers, increased guest count and share follow. Our menu gives customers more reasons to choose McDonald's. Consumer NEXT turns that reason into more visits. To share more, I'll hand it over to our Global Chief Marketing Officer and Head of New Business Ventures, Morgan Flatley.

Thank you. Good morning, everyone. So to win in the environment, Chris laid out for us earlier today, we need to be the first choice for more customers more often. Consumers NEXT is our strategy to convert our customer relationships into more visits. Now we start with an advantage that no 1 else has. Our iconic brand an unmatched fandom. McDonald's captures approximately 40% of positive brand mentions on social across the leading QSR brands. That's more than our next 3 competitors combined. This is not an audience we have to buy our way into. We've already got them. They're ours. These fans are the foundation of our new marketing model, which includes engaging them in big global moments and building deeper individual relationships. So we're evolving exactly how we build our brand to be more efficient and effective at moving culture to support customers, making us their first choice. First, big globally scaled campaigns that are purposely designed to be carried by fans and creators. When fans amplify our campaigns, it's more effective because their voices are more trusted, but better yet, when our fans produce and spread content, less paid media is required to reach the same audiences. Second, our campaigns will be built on McDonald's collection of iconic IP, not someone else's. This makes our marketing more distinct, more ownable and baseline building for McDonald's. And third, a simplified marketing calendar with fewer, but bigger ideas. We're roughly doubling our investment in longer-running baseline building programs focused on core credentials, like our brand, tasting quality and value, while reducing the number of short-term promotional campaigns. It's simpler for our crew and it's clearer and more consistent for our customers. Manuel Steijaert, President of International Operated Markets is going to share how this evolution is already coming to life.

Thank you, Morgan. Good morning, everyone. So our International Operated Markets segment spends 19 markets -- it's more than 10,000 restaurants and it represents over 50% of total system-wide revenue. Now great ideas can start anywhere in a system. Our scale turns a local insight into global demand. So our recent global Menu Heist campaign shows how that works. One thing we know about McDonald's fans is when they travel, they go to the local McDonald's and they love to show us what they found. We turned that energy into a traffic-driving program built around our own iconic local menu with a simple invitation for fans to join the Hiest. Let's take a look. [Presentation]

So as you've seen, our local social insight became a global conversation, expanding across more than 20 markets, fans, share the discoveries and did the marketing for us. We received millions of views and thousands of comments from France excited to try, Japan's MakraniteRiaki, Belgium's Biscoff McFlurry and Canada's make shaker fries all in 1 place. We sparked searches across markets. And in Italy, triple the amount of user-generated fan content compared to previous campaigns. And importantly, we achieved incremental guest count in our restaurants and grew sales with our own equities and IP. And that's a pattern we've seen before. Fans rallying around a unique brand experience like Grimes Shake, adult happy meals and famous order. And now it's even more powerful in tandem with menu next and more efficient. We work with around 10 major partners for Menu Heist versus the 40 that we traditionally have been used in each market had to execute locally, reaching greater scale than any market could achieve on its own. Morgan, back to you.

Thanks, Manu. I have to say that's such a fun example. Menu NEXT is really exemplifies the first part of our model. Now let me show you the other. From moments that rallied millions to one-on-one relationships between us and our fans, we can use customer intelligence to bring people back more often. It starts with the relationships we've built. 5 years ago, we launched our loyalty program. Today, we have nearly 220 million 90-day active loyalty customers, growing 45% in just the last 3 years. If they were a country, it would be the seventh largest in the world. Now our original reason for launching loyalty proved true. Active loyalty members visit us 2.5x as often as nonmembers and they spend more over the course of the year. Loyalty allows us to know our customers better to deliver more meaningful value and promotions to them. But we haven't met our full potential, not yet. Now we can with personalization. Let me tell you what we know about our loyalty customers and how we're using our customer engagement engine to earn more visits with relevant offers and experiences. Our 220 million active loyalty customers span a range of behaviors and needs. To illustrate how we use customer intelligence, let me focus on 2 important customer groups. First, we have our frequent loyalty customers, who visit more than once a month. They tend to be especially motivated by deals, events and what's new. Our goal with frequent fans is to recognize and reward their brand love, deepening our relationships with them with more value, convenience and access. To do this, we plan on launching a tiered loyalty program giving our most engaged fans even more from McDonald's, not just savings but offers tied to incremental occasions and trade-ups on things they like most. This could include exclusive benefits and access to things only McDonald's can provide, like earning points faster, early access to limited menu items and merge or a coveted invite to a McDonald's launch event. These things really matter to them. Now second is our casual loyalty customer, who visits at least once in a 90-day window. They also care about value, while also placing more importance on a greater experience and the familiar McDonald's favorites they crave. Our fans visiting occasionally. The goal is to bring them back with more reasons to routinely come back to McDonald's and make them feel recognized and appreciated when they do. Rather than broad discounts, this includes highly personalized experiences based on the food, rituals and moments that matter most to them. Will Taylor offers to their interest a customer who comes for breakfast might receive tailored breakfast rewards, while the family could unlock offers and experiences designed for group occasions and even share bonus points with loved ones. Will drive action that rewards 1 more purchase. Tiers and gamification like personalized missions and menu discovery challenges, giving them more reasons to return with tailored benefits that are clear, concrete and achievable. Now what's really interesting is there's an untapped group beyond our frequent and casual loyalty customers. They are customers who initially signed up for loyalty but haven't visited us in a few months. At any given moment, we have roughly 150 million infrequent loyalty customers to reengage. And our goal is to give them a reason to reconsider McDonald's. Now this group is less likely to respond to brand merchandise, exclusives or experiences. Their proposition needs to be immediate, and practical. They are activated by an incentive that makes them want to reengage, like a birthday bonus or surprise rewards for coming in. In addition, they're seeking value that extends beyond our restaurants. So we're expanding to offer new partner benefits. Still to come this year in the U.S., we'll be offering Uber ride credits in Disney+ subscriptions. This works across all cohorts to ensure McDonald's stays present in our customers' lives between visits. Evolving from a points program to a partnership platform has been clearly effective for bringing customers back into our ecosystem. We've seen that with these partners, using Germany as an example, up to 20% of the customers, who participate are new or infrequent loyalty customers. Personalized a more relevant offers, rewards and experiences are at the heart of our customer engagement engine that builds deeper individual relationships and earns more first choice visits. It's one part of our broader revenue growth management strategy. It creates value for customers and strong restaurant economics for franchisees. The other part is the everyday prices customers see on our menu boards, informed by insights from millions of transactions and a broad range of market data, our menu pricing engine is an industry-leading tool that provides franchisees with pricing recommendations down to the restaurant and item level. Franchisees retain control over independent pricing decisions, but with better information. Together, these capabilities help us continue to strengthen our value leadership and drive more visits fueling long-term growth. Now all of this is powered by data and technology to make it possible at McDonald's scale, we need a common foundation -- let's welcome Dario Barone, President of McDonald's International Developmental Licensed markets to tell us more.

Thanks, Morgan. For context, IDL footprint covers a population of 5 billion people. It includes some of the most technologically advanced markets in the world. Consider China, our most digitized market with 98% of sales coming through digital channel. Our things there are on the forefront of social commerce and new ways to drive loyalty, frequency and engagement. ID is a great learning lab to incubate innovation before our best ideas are scaled across the system. Digital experiences at most companies are built market by market. Each country with different technology, separate code bases, fragmented road maps and inconsistent capabilities. It is slow, it's expensive and it's inefficient. Over the last 3 years, we rearchitected our digital foundation from the ground up, unitfying ordering, marketing, loyalty and data into one single global backbone. That share foundation makes the next leap possible, GMA 1. Also known as Global Mobile AP 1, these our first true global mobile platform, turning everyday digital interactions into dynamic, highly personalized journeys at McDonald's scale. We redesigned GMA1 around the high-frequency moments that matter most, lightning fast reordering, intuitive reward redemption dynamic mill building and frictionless checkout. This includes the highly personalized rewards offers and incentives that Morgan was talking about. In our early research -- the results were definitive. Customers preferred new reward experience about 2.5x more than what they used today. The preferred the new reordering and mill building journeys by more than doubled. GMA1 is the breakthrough. A breakthrough that allows us to build functionality once and deploy it everywhere. With GMA1 and the single unified code base global deployment takes weeks, not years. The new platform unlocks monthly features across near every market. And because this architecture is modular, it is AI ready. It is built for speed, to plug directly into emerging conversational commerce channels without reengineering our core. Our pilot begins in France later this year, with plans to scale across our top 10 largest on markets by end of 2028. Now to show you how we are turning customer engagement into our next major value driver. I'll hand it back to Morgan.

Thanks, Dario. The more our fans engage with us, the more we learn about them as individuals and the more personal and relevant we make each interaction, the more demand we create around our iconic brand. Now on top of that, we have more than 70 million daily customers globally across every generation and daypart and an unmatched footprint from our app to kiosks, menu boards and restaurants. We are identifying more ways to leverage these assets to create new high-margin sources of value for McDonald's and our franchisees. McDonald's Media Network is the first example. Commerce Media is one of the fastest-growing areas in advertising and is expected to reach more than $100 billion in the U.S. alone by 2028. Last month, we moved into markets testing with a pilot across 450 U.S. company-owned restaurants. We're at the beginning of our aspiration to build McDonald's Media Network into a $1 billion business across the McDonald's system over time. It's an opportunity to generate revenue for the system with little in the way of additional cost, no operational complexity and no disruption to our customer experience. You've seen the power and potency of our marketing model. When more customers choose us, we have to meet them with great food, speed, convenience and an experience that feels worth it and we will. Jill will tell us how this all comes together in 1 place with restaurant NEXT.

Hello again. Everything you've heard this morning comes back to 1 place, our restaurants. Our plans to be more customers' first choice more often and grow share are already in motion through menu and consumer next. But in today's landscape, alongside the power of guest count-led growth, we are also focused on driving further restaurant efficiencies to expand our margins. We expect to deliver about 250 basis points of gross restaurant level efficiency over time as we deploy productivity bundles across our owned markets. Let me show you how? First, we're reimagining the design of our restaurants to deliver a more appealing modern customer experience. New kitchen layouts and equipment to both future-proof capacity and make it easier for crew to serve great-tasting food and drinks and unlock productivity gains. The new designs include upgraded play places, improved dining rooms and more open kitchens with visible McCafe beverage preparation that will strengthen customer perception of great taste and quality. Operational changes to kitchen layouts with the introduction of beverage cells, a new server station to make it easier for crew to assemble orders. Delivery lockers and improved drive-thru operations to better serve digital customers. Fast forward windows and drive-thru as standard where space allows, adding up to 25% additional capacity. Now we've also consolidated designs to fewer variations built for more shared components, which further improves our scale procurement advantage. Second, we're deploying Arch IQ, our new AI-powered restaurant operating system. It reduces complexity and frees up labor hours -- so our crew can work more efficiently and focus on improving customer experience with hospitality and great tasting food and drinks. We've brought these capabilities together with new menu and restaurant next innovations into a single operating model and are testing them across 4 operational concept restaurants in Chicago, and in a warehouse restaurant learning lab that some of you will get to visit this afternoon, and it's working. It's visibly working. We've surveyed thousands of customers from the U.S., U.K., Brazil and Australia, and the patent is consistent. 9 in 10 prefer the new designs. Perceptions of great tasting chicken and beverages at Chicago land concept locations are significantly higher, in some cases, up to 10 percentage points higher than it near by restaurants. Now that is what customers see Behind the counter, we're seeing an impact, too. And here to tell you more about that, I'm going to turn it over to McDonald's Global Chief Information Officer, Brian Rice.

Thanks, Jill. Technology is central to helping our restaurant teams deliver the experiences that make McDonald's the first choice for millions of customers. When our crew has fewer complex decisions to make when our managers have real-time visibility and when repetitive tasks are automated we elevate both the crew and the customer experience. Put yourself in the shoes of a restaurant manager today. They're balancing food quality, staffing equipment maintenance, inventory and customer demand across more ordering channels than ever. That's a lot. Over the last few years, we've made significant progress in building the digital foundation to make running our restaurants easier than ever. First, since announcing our partnership with Google, we've deployed Google Edge technology to thousands of restaurants across 7 major markets. and we have plans to complete the rollout in the U.S. in 2027. This brings high-performance AI compute power directly into our restaurants. At the same time, we've unified our point-of-sale systems across nearly all of our markets. We moved from fragmented bespoke local systems to a consistent platform built for rapid innovation. And as we know, AI is only as good as the data feeding it. We've also built a standard restaurant data lake that is connected directly to restaurant-level operations. This allows our AI models to make accurate split-second decisions. By interconnecting the operational heartbeat of over 46,000 restaurants worldwide, our data lake captures billions of data points daily. This creates an insurmountable advantage and a continuous learning loop that competitors can't replicate. The standard foundation is what now enables Arch IQ, bringing automation, diagnostics, predictive alerts and coaching into a single platform used by our crew, restaurant managers, franchisees and our operations team. In our concept restaurants where our Arch IQ is deployed, our crew tell us they have higher morale and more confidence to do their jobs. Let's have a look. [Presentation]

ArchIQ is a game changer. This afternoon, you'll get to experience ArchIQ in action across 4 key innovations. First, voice AI and the drive-through, which we call Archy. Archy takes live orders in both English and Spanish with accuracy above 90%. This frees our crude to focus on hospitality and driving growth. In our early test restaurants with RG drive-through customer satisfaction is above national trends. And as Archy scales, it will free at least 50 labor hours per week. This is 1 of the most significant intangible benefits of ArchIQ. Second, automated inventory. We're eliminating 1 of the most tedious and time-consuming tasks in the restaurant. We can now track stock in real time through Bluetooth low energy tags saving about 5 labor hours per week and reducing food waste by 15%. We believe this is an industry first; third, using connected equipment and computer vision -- the team will show how ArchIQ improves food quality and consistency while also shifting equipment management to predictive operations. This drives about a 50% improvement in key equipment and menu availability in each restaurant. That's unprecedented. And fourth, you'll see how our intelligent accuracy scales verify millions of orders every single day. These enable our credo catch and correct 10% of those orders before they ever reach the customer. This is why we're excited to show you all of this in action today and give you a firsthand look at how ArchIQ is making it easier for the crew and better for our customers. Now to tell you more about how restaurant next reaches the system, I'll hand it back over to Jill.

Thanks, Brian. Now many of the capabilities behind Restaurant NEXT are already proven and are scaling across our system today. ArchIQ is built on learnings from over 8,000 restaurants in China, where a tool called Restaurant General Manager boss already provides a single source of insight and data for restaurant managers through real-time visibility into operations, scheduling and automated inventory management and it's helping drive margin improvements. We have accuracy scales in over 10,000 restaurants today and expect to double that by 2028. Created in France, these scales significantly reduce the number of inaccurate orders before they reach the customer, drastically reducing delivery refunds and unlocking more drive-through capacity at peak hours. Beverage sales and courier fulfillment areas from the U.K. and delivery lockers again from China are also helping restaurants handle growing demand more efficiently. Now based on our years of experience deploying large-scale restaurant innovations such as Experience of the Future, we know how to thoughtfully deploy restaurant level change. NEXT is the destination for our system, but each market's path to get there is based on restaurant readiness, local economics and customer needs. The plan to scale the new restaurant designs, including new kitchen layouts and new lobby designs follows the regular 10-year remodel cycle. Other next elements are incremental to the standard remodel and represent opportunities to unlock greater growth and productivity at an even greater pace starting in 2027. The additional capabilities, for example, ArchIQ, the menu and many of the operations enablers will deploy in sequenced bundles that will prioritize the highest financial impact alongside the most efficient and effective restaurant-level training to help manage the change in restaurants. Let me review the principles that will guide when and where these capabilities are deployed. We deploy where the technology prerequisites are already in place. We verify restaurant readiness before anything scales. Every deployment is held to our global operating and investment standards. So we deliver the expected execution, quality and returns. Above all, deployment is conditions based, a market graduates to the next phase of deployment when it has built the capabilities to run it. As I hope you can tell from my enthusiasm, Restaurant NEXT is expected to support our ambitions be the first choice for more customers and grow share by contributing directly to a better customer experience and facilitate efficient restaurant operations of about 250 basis points over time. That sets us up to reinvest in the customer experience and grow. Ian will have more about the specifics of the economics and the implications for returns for both the company and franchisees in his presentation. But of course, as we all know, restaurants don't create great experiences on their own. They need the crew to make that happen. When we make restaurants easier to run, we help restaurant teams focus on delivering the hospitality that brings customers back. To share more about how we'll redefine hospitality across the system. Let me hand it over to McDonald's Global Chief People Officer, Tiffany Boyd.

Thank you, Jill, and good morning, everyone. -- in the lobby of our building, there is a Fred Turner quote that's inscribed on the floor. And it says, we are a people business, and we never forget it. Today, we have the data to show why that principle really matters for our growth. When we compare U.S. restaurants in the top quartile versus those in the bottom quartile on employee engagement and retention, -- those in the top quartile deliver 10% more guest counts, 15% higher sales and 20% more cash flow than those in the bottom quartile. Why? It's the same brand. It's the same menu. It's even the same equipment, but the difference is the people and the environment that we create for them to perform at their best for our guests. Our research shows that McDonald's outperforms key competitors on people and culture across most international operated markets and guests recognize the important role of our crew in creating great experiences. The connection is straightforward, engaged crew members execute better. Better execution leads to better guest experiences, and those experiences drive greater guest counts, sales and cash flow. Together, these insights reinforce that hospitality isn't just a feeling, it can be a real growth driver for McDonald's. And that is the focus of People NEXT. It's about creating great experiences consistently and at scale. On October 5, Ray Kroc's birthday and our Founder's Day, we're launching Make Golden. It begins with the largest capability building initiative in our 7-year history. And it all equipped 2 million people with the training tools and support needed to deliver the great food, and great hospitality that are uniquely McDonald's. Make it Golden will continue as a multiyear road map to build capabilities that can be taught, measured and scaled to drive real business outcomes, all while retaining the heart and soul of McDonald's. Make it Golden has built around 3 commitments: first, equipping our people with better tools and training; second, strengthening our standards and how we measure performance. And third, delighting our guests with hospitality that's distinctly McDonald's. Each commitment represents an evolution in how we engage and support our restaurant teams. Let's start with how we'll upskill our people to perform at their best and do their best work. We'll do this by leveraging training, technology and simpler ways of working. Not only does this create a better work experience for our people, but it also creates more capacity in the restaurant. Prioritizing the crew experience delivers real economic value for our franchisees because confident, well-trained restaurant teams not only perform more consistently, but they actually stay with the brand longer. In our U.S. restaurants, the cost of replacing a crew member is about $1,600 and replacing a shift manager costs roughly $5,800. And that's before you consider broader impacts on service sales and guest satisfaction. So having a well-trained and engaged crew can help avoid these costs while delivering a great guest experience. We know this upskilling approach works. In Australia, our step-up initiative built training, coaching and accountability around real observable hospitality behaviors. And in just 1 year, we saw double-digit improvements in guest satisfaction and sales grew alongside it. We will now scale that kind of impact across the McDonald's system. Through Make It Golden, we will engage franchisees across our owned markets by the end of 2026 with a common upskilling program. It will give operators a clear framework for building crew capabilities improving execution and delivering stronger restaurant performance. Today, way too much of running a restaurant relies on paper, spreadsheets and disconnected systems. As Brian mentioned earlier, ArchIQ provides AI-enabled tools that simplify operations and help identify issues before they become downtime. The result is less administrative burden, more time spent leading crew and serving guests and more consistent execution across our restaurants. Our second commitment is to strengthen our standards. Great food and great hospitality have always mattered to McDonald's. What's changing is our ability to measure consistently and to scale what works. Going forward, we're elevating both within our restaurant performance review process, giving restaurant teams greater visibility into performance and more consistent coaching on how to make improvements. To do that, we're leveraging Qualtrics, our experience management platform to bring together guest feedback, employee feedback and operational performance data all in 1 place. Earlier this year, we launched our first global employee listening platform, generating more than 300,000 employee responses across 7 markets in just a few weeks. Today, these insights sit in separate systems. But going forward, we can connect them, leveraging one common data lake that you heard Brian mention earlier. This will give us a clearer view of how employee and guest experience impact business performance. In Q1 of 2027, we will deploy the system across the U.S. and IOM markets. We're also rethinking what we measure. Today, we evaluate whether a crew member uses the right words. Going forward, we'll also evaluate whether they create a feel-good moment. When you pair this with guest friendliness scores, we'll be able to see and evaluate hospitality from both sides of the counter. This will come to life in real tangible points of reflection, 4x annually at each restaurant when we assess performance against our operating standards. So measurement only tells us where we stand, what guests actually feel gives decided somewhere else. At the front counter, at the drive-through window and oftentimes in a delivery bag, which brings me to our third commitment, which is to delight our guests with Golden hospitality that's distinctly McDonald's. Our goal is to make the McDonald's brand of hospitality, recognizable, scalable and repeatable and relevant across all channels, while still giving restaurant teams the freedom to create moments that build brand love and feel authentic to their customers and their communities. Let me tell you what happened in China, where 98% of transactions are digital and half of all orders leave in a delivery bag. You might expect hospitality to get lost in that environment, but it didn't. Let's take a look. [Presentation]

Now the important part of this example isn't the extra nugget or even the nugget man. It's really the empowerment of the crew. They paid attention, saw an opportunity and took action to create something special. Now imagine teams and over 46,000 restaurants, creating those types of experiences in moments. That is the kind of experience that strengthens preference and give guests around the world another reason to choose McDonald's, a reason to make McDonald's their first choice. Our ambition is simple. Establish a differentiated McDonald's guest experience by equipping our people, strengthening our standards and delighting our guests. We have the people. We have the scale, we have the road map to make hospitality a competitive advantage that only McDonald's can deliver. And that is how we'll make it golden. Now at this time, we will take a short break. Following that, our Global Chief Financial Officer, Ian Borden, will take the stage to discuss McDonald's next financial impact. Thank you.

Good morning, everyone. Our outbreak will end at 10 a.m. We will resume our program at 10:00 a.m. Thank you. [Break]

Please welcome Global Chief Financial Officer, Ian Borden.

Good morning, everybody. Welcome back from break. Throughout the day, you've heard about the opportunities that we're pursuing through McDonald's Next. And I want to translate those opportunities into the results that we expect. McDonald's NEXT isn't just a growth strategy. It's a value creation strategy designed to generate attractive returns for franchisees and shareholders and designed to strengthen restaurant economics and create the capacity to reinvest for long-term growth. Ultimately, that's what powers the growth and productivity engine that Chris introduced earlier. The combination of our scale and the capabilities that we've built through accelerating the Arches is what makes NEXT possible. Together, they create significant opportunities for growth and a step change in productivity. From my colleagues, you've heard how NEXT will position our business towards the highest growth categories and make the largest upgrade to taste and quality in McDonald's history. This upgrade will help us deliver approximately 1.5 points of share gains in both beverages and chicken by 2030. How NEXT will activate the full power of our global fandom, refocus on our McDonald's IP, further personalize the app experience for our loyalty members and reactivate our occasional customers to support baseline guest count growth. How NEXT, we'll leverage our foundational technology investments to bring about AI-enabled capabilities to life at scale, while making our restaurants easier to operate and unlocking about 250 basis points of gross restaurant level efficiency. At the company, AI will help enable a step change improvement in corporate G&A. And through Make It Golden deliver high-quality execution and hospitality to make the McDonald's experience people love even better and drive guest count-led growth. These are not stand-alone investments. They're connected capabilities. They reinforce one another, create stronger unit economics and build greater capacity to reinvest over time. So let me get into some more detail on what it's going to take to bring next to life, the readiness of our system to do that and the returns that we expect NEXT to generate. Let's start with our franchisees, their financial health is industry-leading. In the U.S., average unit volumes are north of $4 million with operating cash flow of about $500,000. And compared to 2019, total cash flow across the U.S. franchisee organizations is up nearly 50%. Across our big 5 IOM markets, average unit volumes are more than $4.5 million with cash flow of around $400,000. These strong economics support healthy franchisee balance sheets and substantial financial capacity to continue funding investment to support long-term growth. And that's exactly what's planned as part of our strategy. Today, a standard required lobby remodel of an average drive-through restaurant in the U.S. costs about $400,000 to $450,000. This is funded by the franchisee, as outlined in our franchise agreements. Restaurant NEXT will be incrementa to that investment. It's the additional operational kitchen and technology capabilities that design elements as well that we believe unlock incremental growth and greater productivity. The economics are compelling. As Jill discussed, across our wholly-owned markets, we're targeting about 250 basis points in gross restaurant P&L efficiency as NEXT is fully deployed. For an average restaurant in the U.S., that's about $100,000 of gross annual cash flow. We expect a portion of that will be reinvested to support next growth initiatives, but that the majority will benefit the restaurant's bottom line over time. That's real value creation at the restaurant level. To deploy all Restaurant NEXT elements for a traditional drive-through restaurant, we estimate an incremental investment of approximately $800,000 per U.S. restaurant and generally $650,000 to $700,000 across our top IOM markets. Importantly, those investments will be phased over time. The technology kitchen and operational capabilities will be adopted as they become available. Design elements will largely align with the normal remodel cycle. So franchisees can invest progressively as capabilities are deployed and benefits are realized. And they won't be making those investments alone. McDonald's will partner alongside franchisees for a portion of the incremental NEXT investments through a mix of rent relief and capital support. The mix and level of support will vary by market and be flexible and targeted to the realities that franchisees face locally. The principle is simple and consistent with past practice. The full restaurant -- next program should generate attractive returns for both our franchisees and McDonald's. When franchisees have stronger economics, our system is stronger. This is not new. We successfully partnered with franchisees on large-scale reinvestment programs over time. Most recently, experience of the future demonstrated how aligning investment with value creation can accelerate modernization build capacity and generate attractive returns across the system. Through 2036, we expect to provide $8.5 billion in total NEXT partnering, which contains both rent relief and capital support. This includes about $5 billion by the end of 2030 to accelerate deployment of ArchIQ technology bundles as well as kitchen and operations enablers. Holistic Restaurant NEXT investments will have about a 4-year payback for franchisees after partnering and about a 5- to 6-year payback for McDonald's, consistent with previous significant growth initiatives. The power of NEXT, combined with our strong balance sheet, will structurally strengthen restaurant economics and the financial capacity of our franchisees. In turn, this will increase the long-term growth potential of our system by purposely positioning our business towards the greatest opportunity areas. The targets we're introducing today reflect the financial impact of the choices we've discussed. They're grounded in demonstrated performance, the expected economics of restaurant next and the opportunities that we see ahead. Beginning with the top line, each pillar of NEXT is designed for McDonald's to be the first choice for more customers more often to ultimately deliver sustained baseline guest count growth. At the same time, capabilities such as AI-enabled revenue management and Archy suggestive sell will help increase average check over time. Taken together, we believe NEXT positions McDonald's to deliver more durable comparable sales growth. Since our last investor update, nearly 3 years ago, we've delivered against our commitment to increase the sales contribution from new restaurants. In 2026, new restaurants will contribute about 2.5% and driven by the fastest pace of restaurant unit expansion in McDonald's history. In 2027, we expect new restaurants to contribute nearly 2.5% to system-wide sales growth and moderate to about 2% by 2030. Underlying this sales growth is a net restaurant unit growth target of nearly 4.5% in 2027. And between 3.5% and 3% annually between 2028 and 2030. This includes more than 550 combined U.S. and IOM openings annually through to 2030. The targeted pace of new restaurant openings reflects our disciplined commitment to adding restaurants only when and where we expect to see strong long-term returns for both the franchisees and the company. We continue to see attractive near-term returns for new restaurants. And over a typical 20-year period, the company returns are in the high teens percent range, which is well above our long-term cost of capital. In short, these returns provide confidence in our ability to continue to grow, while maintaining our disciplined approach to capital allocation. All new restaurant openings will incorporate the Restaurant NEXT design beginning in the first quarter of 2028, and we expect the cost of the new design standard will be comparable to existing costs. Between 2027 and 2030, based on today's rates, we expect to spend about $3 billion in baseline annual capital expenditures, with the majority supporting new restaurant development. Additionally, over the same period, we plan to spend around $1.5 billion to $2 billion on a cumulative basis to support the accelerated deployment of Restaurant NEXT through capital partnering. Just as we're disciplined about when, where and how we invest capital, we're also taking a disciplined view to ensure that every restaurant is owned and operated by the right organization within our system. As we shared earlier this year, we've already begun taking steps towards a higher franchise mix and are targeting an increase from about 95% franchise today to about 98% globally by the end of 2028. We believe our highly franchised model supports a more efficient and scalable corporate structure, enabling us to focus resources on the capabilities that matter most to our system, which brings me to G&A. As Chris discussed earlier, we've been improving our operating efficiency over the last several years. We've reduced our G&A expense as a percentage of system-wide sales from above 2.4% in 2021 to about 2.2% in 2026, all while continuing to invest in areas of growth, such as improved digital capabilities and our transformation efforts across the business. When I spoke to you in 2023, Global Business Services was an emerging capability. Today, it's an established operating engine across McDonald's. Over the past 3 years, we've redesigned processes and modernized systems. We've made significant progress to build a trusted enterprise data lake and consolidate work into global capability centers. These changes allow us to leverage our scale and serve markets with greater speed and consistency. New enterprise data, analytics and AI capabilities are becoming a powerful driver of productivity. They're helping us further simplify and automate processes and accelerate decision-making and innovation across the business. As adoption scales, these capabilities will help us operate with greater efficiency and support the meaningful step change in our cost structure. We expect G&A as a percent of system-wide sales will begin to decline in 2027 as we generate efficiencies and manage our overall spend. And we'll continue to leverage G&A in subsequent years as we target about 1.9% of system-wide sales by 2030. Importantly, we expect these G&A efficiencies will help fuel investments for long-term growth and drive profitability. That balanced approach is in our outlook for our operating margin. By 2030, we expect to expand adjusted operating margin to the low to mid-50% range through a combination of top line operating leverage and the cumulative impact of our refranchising efforts and G&A savings. Strong margins are important. Converting those earnings into cash is equally important. We expect the levers that I've discussed today to increase free cash flow conversion from today's low to mid-80% range to the mid- to high 80% range by 2030. Our strong cash flow generation provides flexibility to maintain a consistent and disciplined capital allocation framework as we remain steadfast in our commitment to be good stewards of capital. Our first priority is to reinvest in the business to generate attractive returns and drive sustainable, profitable long-term growth. We believe our adjusted new restaurant opening pace and McDonald's NEXT are both strong examples of this. Our second priority is to return excess free cash flow to shareholders over time through dividends and share repurchases. We continue to target a dividend payout ratio of between 50% to 60% of EPS, and we'll proudly join the short list of dividend Kings with our 50th consecutive annual dividend increase. And finally, we remain committed to a strong balance sheet. We continue to believe that maintaining our current investment-grade credit rating enables the company and the broader system to invest consistently in growth initiatives. It also provides us additional flexibility, when returning cash to shareholders while efficiently accessing capital at attractive cost and terms. I'll close with what I mentioned earlier. McDonald's NEXT positions us to deliver more durable comparable sales growth, support strong EPS growth. and reinforce our position as a high-quality long-term compounder. The scale of our investment reflects the scale of the opportunity, an opportunity that only McDonald's can capture through our scale. The reach of our brand, the strength of our balance sheet, our world-class franchisees and suppliers and our successful track record of turning investment into long-term returns. Very few companies can say that. Fewer still can act on it, and we are. And with that, we'll get ready to take your questions.

Thanks, Ian. Hello again, everybody. We're now going to take the next 30 minutes for Q&A. Chris and Ian will be up here on stage, obviously. We have other members of our senior leadership team here as well. We have a couple of mic runners. On each side, up in the audience, I'll help facilitate this session. At the end of Q&A, we'll conclude the live stream, and then I'll discuss next steps with those here in Chicago. When you're called on, please state both your name and your firm. And with that, let's take.

And basically, the effectiveness of that. You talked about a lot of new things coming. You've done a lot of things in the last 18 months as well. What have you learned from what you've done and how you do it, that funnel or state stating that you do from chicken to beverage to marketing and value? And then why do you feel like maybe you're making adjustments that your hit rate might be better in the future.

Yes. Thanks for the question. I think ultimately, this strategy that we've unveiled as a growth strategy, certainly enabled by productivity and I think as we think about the business, there's 2 elements to how you drive growth in the business. There's baseline growth and there's incremental growth. And the foundation that we're talking about here is really about driving that baseline growth. That's the sort of sustaining growth. That ultimately is what creates that long-term value creation. Now you need to punctuate that periodically with incremental activity, things like a FIFA promotion or Micraft or whatever. I think 1 of the things that we've learned certainly, I talked about this on Q2 is you've got to make sure that the balance is really weighted to the baseline. And yes, you need to do the incremental. But if you get over you put too much on the calendar around incremental, it can add complexity to the restaurant. And ultimately, then you start to have the issue with lapping that activity, and then you start to having to add more on to the calendar to do that. So I think what we're really focused on here is the foundational elements, improving taste and quality of the food that we serve, making sure we're in the right categories making sure that we're providing sustained support on that. It's not just sort of an in and out, but that we're doing that consistently over time. All of those things are going to drive the baseline. I think those are probably the biggest learnings that we've taken away from what you described as the last couple of years.

Maybe just one add to the question, David. I think beverages to me, is a great example of something, I think, that we've executed very well and driven baseline, but also driven innovation and put ourselves in a new category. Obviously, we did a lot of research, as you know, through COSMIC. And then I think the test that we did in both the U.S. business and in other markets as it's come to life. And we've executed, I think, incredibly well, both from a customer and from a restaurant execution standpoint and ease of execution. And so I think that's to Chris's point, a great example of baseline building test and learn quickly and get to scale quickly. And as we talked about a bit in our script, you're going to see beverages in all of our IOM markets in Europe in the first half of '27 because the business can see the opportunity, and we've obviously done a lot of work to make sure that we can execute that opportunity very effectively at the restaurant level.

Andrew?

Great. Thank you for the presentation today. It's Andrew Charles from TD Cowen. In the spirit of driving durable sales growth. In the past, you've talked about normalized U.S. and IOM same-store sales of 3% to 4%, you're gaining share in a category that grows around 2% to 3%. And I know you talked about an expectation for flat industry traffic over the medium term, but does the next plan give you confidence that you can return to kind of the normalized rate of same-store sales you've seen of that 3% to 4% level, particularly in the U.S.?

Yes, absolutely. I think what we're rolling out here is really based on our confidence that we can go deliver that share growth that we talked about in chicken and beverages and also that we can hold our leadership share in beef. And so as we think about our algorithm despite sort of what we're expecting is flat industry traffic. Our expectation is we're growing traffic. And then on top of growing traffic, you're getting check with that drives comparable sales. We're also, as you heard, we're continuing to invest, where it makes sense on new restaurants. So you put all those things together, and we have a lot of confidence in the algorithm that you just highlighted there.

And maybe just a build to that a little bit, I think because obviously, we've given a fair bit of texture today on the scale of the investment behind that, which is significant. But I'd say the level of the investment is linked to the level of opportunity. And I think we think there's a really clear and compelling opportunity. We think that opportunity, as you heard me talk about, provides compelling returns for our franchisees and for McDonald's, which is why we're going to support bringing that opportunity to life, and we're going to obviously go after that as aggressively as we can, obviously, managing some of the things we talked about earlier with executing well.

Danilo?

Danilo Gargiulo with Bernstein. Ian, I was wondering if you can expand a little bit on how you're planning to get to the mid-30s margin for McDonald's over time. Maybe if you can walk us through the puts and takes since you're talking about industry traffic remaining under pressure. Chris were talking about the inflation in the United States and even beyond in the rest of the world, still remaining quite elevated. And so what is the role of the different components of your P&L that will get you to that level of margin? And what role is the refranchising playing to get to the...

Yes. Thanks, Danilo. Good question. So I'd say, I think of it as 3 key components. First and always the 1 that's most important is you've got to get to that durable comparable sales growth. And I think we've talked a fair bit about our confidence and the underpinnings through the category share growth targets that we've outlined, I think through what you heard from Morgan in terms of we've done a lot of work through accelerating arches to build this loyalty base of 220 million plus consumers how do we activate those consumers and create even more connection, more value in the experience that we get and obviously drive incremental visits over time. So I think there's lots of confidence in the ability to kind of get to that more durable comparable sales growth. And as we drive strong top line growth, obviously, that always allows us to deliver leverage from an operating margin standpoint over time. I think the other 2 key components to that are the G&A target that I outlined, which is how we get from about 2.2% of system-wide sales today to about 1.9% by the end of 2030, which is a meaningful step change at the enterprise level from an efficiency. And then the last component is the franchise mix globally. We're at about 95% at the start of 26%, and we're going to get to about 98% by the end of 2028. So it's those 3 components that come together that kind of enable that move to the low to mid-50% range.

Dennis?

Dennis Geiger, UBS. Thanks for putting the day together Chris, you've talked a lot about the importance of value for a while now, but I think a little bit less so in the presentation thus far today. So wondering if you could speak a little more to where the brand is as far as value positioning goes, how you think about the value strategy over the coming years? And if any update, on how you think about winning with that lower income consumer in the U.S.?