Everyone knows McDonald’s for burgers, fries, and a very loud brand. Last month, the company told investors it wants to be known for something else, too.
Executives spent the morning in Chicago laying out a plan called McDonald’s (MCD) NEXT. Most of it focused on menus, restaurants, and technology. Tucked inside was an idea that could move the revenue needle for the fast-food giant.
McDonald’s wants to unlock a brand-new revenue stream by using something it already owns: the attention of millions of people every day.
Why MCD stock has a built-in audience
Let’s start with the size of the crowd. McDonald’s serves more than 70 million customers every day, according to CEO Chris Kempczinski at Investor Day.
Global Chief Marketing Officer Morgan Flatley said the company has nearly 220 million loyalty customers who were active in the last 90 days. This metric has risen by 45% over the last three years.
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Loyalty members visit 2.5 times as often as non-members. Flatley has said that if McDonald’s daily customer base were a country, it would be the seventh-largest in the world, Adweek noted.
It’s clear that McDonald’s does not have to buy its way to a crowd. In fact, it already has one that can be monetized further.
McDonald’s CEO Chris Kempczinski aims to unlock a new revenue stream.Win McNamee / Getty Images
McDonald’s $1 billion bet on ads
Flatley called it the new venture, the McDonald’s Media Network.
Commerce media ads are sold where people shop and order. It could be an ad on a menu board, a kiosk screen, or even in-app.
This segment is among the fastest growing verticals in advertising and is expected to surpass $100 billion in the U.S. by 2028.
McDonald’s recently moved into market testing, and the pilot covers 450 company-owned U.S. restaurants.
Flatley said McDonald’s aspires to build the network into a $1 billion business across the system over time.
Last quarter, the burger behemoth reported total sales of over $7 billion.
She also explained why management likes the idea. “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.”
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Flatley said the company is looking for new ways to use assets it already has.
Flatley explained that with 200 million active loyalty members and more than 70 million daily customers across age groups, McDonald’s has a significant customer base it can monetize.
These advertisements can be shown at in-store kiosks, menu boards, restaurants, and in-app.
Each one is a place where an advertiser might want to be seen. McDonald’s would simply be renting out space it already controls.
What it means for MCD stock price
Here is the honest part. The Investor Day event did not say how much profits the ad business could generate.
But if we assume a 75% margin, it could increase cash flow by $700 million at $1 billion in ad revenue.
Management also did not list the media network among the three drivers behind its margin goal. CFO Ian Borden named durable sales growth, lower overhead, and more franchised restaurants.
The goal is for adjusted operating margin to reach the low- to mid-50% range by 2030. McDonald’s also wants overhead to fall from about 2.2% of system-wide sales to about 1.9%. And it wants to move from about 95% franchised to about 98% by the end of 2028.
So the ad business looks like extra upside, not the core of the plan. Any new revenue that costs little to run could help the numbers.
McDonald’s sales backdrop
The timing helps explain the interest in new revenue.
Borden said U.S. sales are expected to be slightly negative for the third quarter. July and August were both slightly negative, he said, though September is expected to be positive.
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Kempczinski also said industry traffic in McDonald’s wholly owned markets is expected to be flat while inflation stays elevated.
The company is also spending heavily elsewhere.
Borden said McDonald’s plans to provide $8.5 billion in NEXT partnering through 2036. It includes rent relief and capital support for franchisees. About $5 billion of it will come by the end of 2030.
A high-margin ad business could help balance some of that spending.
McDonald’s has a simple story to tell here. It has the audience, the screens, and the data. Now it wants to turn them into a new income stream.
The pilot is small, and the $1 billion goal is open-ended. Investors watching MCD stock should look for updates on how far the test spreads beyond 450 restaurants.
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