McDonald’s stock gains despite franchisee backlash over upgrade costs

McDonald’s Corp. shares climbed 0.3% on Tuesday, despite reports of franchisee pushback over a costly store upgrade initiative. The company’s plan to overhaul restaurants and menus has met resistance from U.S. franchise owners, who were caught off guard by an estimated $800,000 per-location cost. Combined with additional remodels priced at least $400,000, franchisees could face a total bill of around $1.2 million per restaurant.

McDonald’s has committed approximately $8.5 billion in cash and rent relief to ease the burden, though the support varies among franchisees. The company maintains confidence in its “Next” business plan, led by CEO Chris Kempczinski, which focuses on enhancing food quality, service, and efficiency. The initiative follows a significant drop in McDonald’s stock, which fell 32% from late February to September, wiping out nearly $80 billion in market value.

Franchisees have expressed concerns about the project’s high costs and lack of details in recent meetings. Many operators worry about increased debt and are seeking more clarity on expected sales improvements from the upgrades. The company has established task forces to review the financials with franchisees and leaders.

Industry analysts, such as Gregory Francfort of Guggenheim Securities, predict franchisees will negotiate to reduce the upgrade costs by 20% to 40%. The pushback comes as McDonald’s faces slowing U.S. sales, partly due to an underperforming value lineup last quarter. Rising costs of beef, labor, and equipment are also pressuring restaurants across the sector.