“Would you like ads with that?” Like it or not, that’s what consumers are about to get when they go through a McDonald’s drive thru. At its Sept. 23 Investor Day, McDonald’s Corp. (NYSE: MCD) announced an initiative to start its own media business. That means that customers will start seeing ads while they wait for someone to take their order.
It’s a playbook already being used by Walmart (NASDAQ: WMT) and Amazon (NASDAQ: AMZN). There’s a good reason why. Once implemented it’s a high margin business in a retail space that can find its earnings put under pressure by everything from tariffs to how inflation impacts consumers.
Investors weren’t impressed. Shares of MCD stock were down over 4.8% in the trading session as investors saw treated the color that the company added to its Restaurant > NEXT initiative as being more sizzle than steak.
A $1 Billion Ad Business Hiding in the Drive-Thru
To be clear, the media network is still in its early innings. In August, 450 company-owned U.S. restaurants began showing ads for other companies on their digital drive thru order boards as part of a pilot. The program hasn’t reached the franchisees who run the rest of McDonald’s roughly 14,000 U.S. locations yet. Still, management believes it could eventually become a $1 billion business.
The pitch to investors is simple. Chief marketing officer Morgan Flatley said U.S. commerce media is expected to top $100 billion by 2028. She described it as revenue that adds little cost and no operational complexity. And the audience is massive. McDonald’s has said it serves about 26 million Americans daily.
Remodels Come with a Hefty Price Tag
This is where the sticker shock set in. Through 2036, McDonald’s plans to spend up to $8.5 billion helping franchisees invest in the restaurant improvement plan. About $5 billion of that spending will be spent between now through 2030. Franchisees will face roughly $800,000 in additional costs per restaurant, with McDonald’s covering part of it through rent relief and capital support.
Upgrades include delivery lockers, more visible coffee prep areas, bigger play areas, and better kitchen layouts. The company is also rolling out ArchIQ, an AI system built with Google to improve order accuracy and automate tasks like scheduling.
The payoff? Management expects roughly $100,000 in annual cash flow benefits for the average U.S. restaurant. It’s also targeting an operating margin in the low-to-mid 50% range by 2030, up from 46.1% in 2025.
Chicken, Protein, and the GLP-1 Question
The in-store decor isn’t the only thing getting a makeover. McDonald’s is also making menu adjustments. Chicken is front and center. Hand-breaded chicken has lifted sales and quality ratings at 10,000 restaurants in Asia and a few near Chicago. Testing expands to more U.S. markets and Ireland next year.
That puts McDonald’s in direct competition with rivals like Chick-fil-A and KFC. Grilled chicken sandwiches and wraps are also coming, along with tests of egg bites and bowls.
That protein push speaks to the GLP-1 fear that has hung over the stock. But management says the data doesn’t back up that claim. U.S. president Skye Anderson said 84% of households with at least one GLP-1 user still visit McDonald’s. And while about 30 million Americans use the drugs, company research shows 60 million are actively seeking more protein. That’s a menu opportunity, not a data point that spikes an overreaction.
The Consumer Is Still the Wild Card
That doesn’t mean there are no concerns about the financial health of the consumer. U.S. same-store sales grew just 0.8% last quarter, and traffic fell. CEO Chris Kempczinski expects inflation and flat industry traffic to persist. The company also reportedly pushed its 50,000-restaurant target from 2027 to 2028. Since remodels will be phased in, the turnaround may take a couple of quarters to show up.
Investors may need patience. The market is pricing McDonald’s as a broken brand. Management calls it an execution problem. The latter is fixable. That’s why investors don’t need to wait for proof in the numbers. Accumulating shares in stages lets you build a position before the turnaround becomes consensus.
The MCD Chart is Starting to Look Tasty
Let’s be clear, it’s been a rough year for McDonald’s shareholders. After spiking to a 52-week high in February, MCD is down approximately 30%.
That’s pushing the stock down to levels it hasn’t seen for nearly four years. Strictly based on technical signals, MCD may have further to fall. The 50-week simple moving average (SMA) is declining into a slightly rising 200-week SMA. More pressure on the stock in coming days could form a death cross signal where the 50-day crosses below the 200-day. That’s almost always bearish in the short term.
However, while you shouldn’t invest based on vibes, the bearish sentiment surrounding MCD feels overdone. If I have to take a bet on individuals not eating at McDonald’s or the company’s current issues being more about execution, I’ll take the latter.
If I do, then MCD looks tasty specifically because the premium on the stock has dropped to around 19x earnings. That’s a discount to the S&P 500 and its historic average. I’ll also consider the company’s dividend. It pays me to wait, and the company increased it for the 50th consecutive year on Sept. 17, which makes it part of the exclusive club of Dividend Kings.
