McDonald’s Investor Pitch & Royal Caribbean Lands on Sandals

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Hanna Horvath (0:32)

Royal Caribbean is getting off the boat and spending $3 billion to do it.

Dylan Lewis (0:35)

And McDonald's shows investors what's next.

Hanna Horvath (0:38)

For Wednesday, September 23rd, it's Brew Markets Daily. I'm Hanna Horvath.

Dylan Lewis (0:41)

And I'm Dylan Lewis. Let's get moving and grooving.

All right, later in the show, John is gonna hit us with some bittersweet earnings from Cracker Barrel and General Mills. But we are kicking off today talking fast food. 2026 has not exactly been the best year for McDonald's. Stock was at all time highs in February, is down 20% year to date. To help right the ship, the company announced a new head of North America earlier this summer. And this week, they gave investors a look at the details for their McDonald's next strategy. Hanna, what's the plan to put the shine back on the Golden Arches?

Hanna Horvath (1:22)

I would say this is a pretty comprehensive refresh of the McDonald's experience. So the core elements of the plan are new restaurant designs including mandatory remodels of franchisees, a planned Make It Golden employee training program to improve in-store hospitality, and then on the menu side, they want to keep leaning into categories where consumers are actually spending, which helps explain a push into chicken and drinks. So McDonald's is going to give Chick-fil-A and KFC a run for their money with things like new hand-breaded chicken, expanding McNuggets, flavors and sauces, plus more McRisbee sandwiches, wraps, McRibs.

And last but not least, because apparently no corporate strategy presentation is complete without AI, the company introduced ArchIQ, their new AI-powered operating system. So the idea here is to use technology and upgraded equipment to make restaurants faster and more efficient. So the pitch with all this is basically let's make McDonald's feel a little bit nicer, run a little bit better, and sell more of the stuff that customers actually want.

Dylan Lewis (2:19)

In terms of how all this overall strategy fits into the financials and the outlook, management is expecting operating margins above 50% by 2030 as all these things come together. Currently, those sit around 46%, so that would be a market improvement.

As you noted, the company is looking to push further into chicken, also beverage products. Those have been very successful categories for them in recent years. Makes sense strategically, but also if you think about it financially, helps reduce the company's reliance on beef. I mean, McDonald's is always going to be known for its burgers, but beef has gotten incredibly expensive over the last five years. Chicken prices have also gone up, but not nearly as much as beef. And beverages, as we all know, are probably the highest margin revenue item for them on the menu.

Hanna Horvath (3:00)

This is music to my ears, because I'm a big fan of the McNuggets, and I love a McDonald's Diet Coke. It's the best Diet Coke out there. Just trust me on this. But broadly, I get the strategy. You know, what's interesting, though, is that investors apparently wanted more from this. The stock fell about 5% after the presentation. And I think part of the hesitation is that this is an expensive plan before it can become a profitable one. So, McDonald's is overwhelmingly franchised, but corporate is committing to pay $8.5 billion to help operators upgrade their restaurants. So, you are talking about a pretty significant upfront investment to target that operating margin. And management has also talked about cutting costs, but there wasn't a ton of detail yet exactly on how those savings or where they're going to come from.

Dylan Lewis (3:42)

Taking a step back, I mean, we were talking about how McDonald's stock has struggled in 2026 at the beginning of the show. The actual business results for McDonald's have not been that bad. They've generally been at or above street expectations with their earnings results, except for their most recent report. What's really been weighing on this business and on the stock is the overall outlook. And with each earnings report, management has kind of warned the market, hey, the macro picture is going to start playing into results.

They see that in particular because the environment is disproportionately hitting lower income consumers the hardest, and that means that this company and a lot of others in the food business have to compete on value for their core customers. This is something that I've observed personally, fast food, because I am honestly a pretty big fan of fast food. I've got my go-to orders like the McDonald's Daily Double. It's a $6 deal. At Wendy's, I got the $6 biggie bag. These are excellent deals for consumers, things I love to treat myself to, but these are probably not the greatest things for restaurant margins and overall sales.