McDonald’s makes most of its money not by selling hamburgers, but by collecting rent. The company earned nearly $27 billion in total revenue in 2025, and the most profitable slice of that came from franchised restaurants, where McDonald’s acts as landlord and brand licensor rather than burger flipper. Understanding this distinction is the key to understanding how the company actually works.
The Franchise Model Drives Profits
About 95% of McDonald’s restaurants worldwide are run by franchisees, independent business operators who pay McDonald’s for the right to use the brand. McDonald’s collects two main streams of income from each franchisee: rent on the property and a royalty fee based on the restaurant’s sales.
In 2025, franchised restaurants generated $16.5 billion in revenue for McDonald’s, roughly 62% of total company revenue. But revenue only tells half the story. Because McDonald’s doesn’t pay for the food, labor, or day-to-day expenses at franchised locations, the margins are enormous. Franchised restaurant margins totaled $13.9 billion in 2025, representing over 90% of all restaurant margin dollars the company earned. Compare that to the company-operated restaurants, which brought in $9.7 billion in sales but produced only $1.4 billion in margins after covering food costs, payroll, and operating expenses.
Put simply, McDonald’s keeps about 84 cents of every dollar it collects from franchisees, while it keeps roughly 15 cents of every dollar from restaurants it runs itself. That gap explains why the company has spent decades shifting toward a franchise-heavy model.
Real Estate Is the Core Business
Since 1956, McDonald’s has followed a distinctive playbook: buy the land, build the restaurant, then lease it to the franchisee. The company owns approximately 80% of its global restaurant locations. This makes McDonald’s one of the largest commercial real estate holders in the world, and it’s the single biggest reason the company is so profitable.
Real estate earnings now account for roughly 60% of McDonald’s operating income, up from about 40% a decade ago, according to Macquarie Asset Management. The majority of its locations operate under triple net leases, a structure where the franchisee (the tenant) pays for property maintenance, insurance, taxes, and refurbishments on top of base rent. McDonald’s collects rent while bearing very little of the ongoing cost of maintaining the property. That arrangement means most of the rental income flows straight to the bottom line.
This model also gives McDonald’s a stable, inflation-linked revenue stream that doesn’t depend entirely on how many Big Macs get sold in a given quarter. Property values and rents tend to rise with inflation over time, providing a financial cushion even when same-store sales dip.
Royalty Fees on Every Sale
On top of rent, franchisees pay McDonald’s a percentage of their gross sales as a royalty fee. For most existing U.S. franchisees, that rate has been 4% of gross sales. Starting in 2024, McDonald’s raised the royalty to 5% for operators opening new locations, new franchisees, and buyers of company-owned restaurants. Existing franchisees keeping their current footprint, or buying a location from another operator, still pay 4%.
These royalties add up fast. If a single restaurant does $3 million in annual sales, a 5% royalty sends $150,000 to McDonald’s from that one location alone. Multiply that across tens of thousands of franchised restaurants globally and you can see why royalty income is a massive revenue line, even before rent is factored in. And because the fee is tied to gross sales rather than profit, McDonald’s gets paid regardless of whether the individual franchisee is having a good year or a tough one.
Company-Operated Restaurants
McDonald’s still runs a smaller number of restaurants itself, and those locations generated $9.7 billion in sales during 2025. At company-operated stores, McDonald’s collects all the revenue from food and beverage sales but also bears every cost: ingredients, employee wages, utilities, and operating expenses. After subtracting those costs, company-operated margins came to $1.4 billion.
These restaurants serve a strategic purpose beyond direct profit. They give McDonald’s a testing ground for new menu items, technology rollouts, and operational changes before pushing them to franchisees. They also provide the company with firsthand data on costs, staffing challenges, and customer behavior that informs decisions across the entire system.
Other Revenue Streams
McDonald’s reported $647 million in “other revenues” in 2025, about 2.4% of the total. This category includes fees from technology platforms, licensing arrangements, and other services provided to franchisees. While small relative to rent and royalties, this line has been growing as the company invests more in digital ordering, loyalty programs, and delivery partnerships that generate platform-related income.
Why the Model Is So Profitable
The genius of McDonald’s financial structure is that it separates the high-margin work (owning real estate, licensing a brand) from the low-margin work (buying beef, paying hourly workers, keeping fryers clean). Franchisees handle the expensive, labor-intensive side of running a restaurant. McDonald’s collects rent and royalties with relatively low incremental costs.
This asset-light approach to food service, combined with an asset-heavy approach to real estate, creates a business that looks more like a commercial landlord than a fast-food chain on paper. The restaurant margins tell the story clearly: $13.9 billion from franchised locations versus $1.4 billion from company-operated ones, on a revenue base that’s only about 70% larger for the franchised side. McDonald’s sells billions of burgers every year, but the real money comes from owning the ground they’re cooked on.