Newsletter · · Ashutosh Agarwal

McDonald's Says Flat Traffic and High Costs Are Permanent - QSR Value Wars - Week of September 28, 2026

A synthesis of what podcasts, operators and analysts said about the quick-service value war for the week of September 28, 2026, built around McDonald's investor day, where CEO Chris Kempczynski told markets flat industry traffic and sticky inflation are the new normal, alongside a 314-store Wendy's franchisee bankruptcy and a rare look at what a franchise business is actually worth.

QSR Value Wars

Week of September 28, 2026: McDonald's Says Flat Traffic and High Costs Are Permanent

All summer we've been waiting for McDonald's to explain how it plans to win back the customers it lost. This week it did, at its first investor day in three years. The most important thing CEO Chris Kempczynski said wasn't a target or a new burger. It was a change in mindset: stop waiting for things to get better.

"We need to stop talking about that being a difficult environment and just say that is the environment," he told CNBC on the morning of the event. He expects restaurant traffic across the industry to stay "largely flat," and inflation to stay high "for, unfortunately, I think many more years." When the world's biggest restaurant company tells you, on its biggest investor day, that the tough times are the new normal, the stock falls. It had its worst day of the year.

That's the main story, and it ties together everything else this week. If there's no rising tide coming, every restaurant has to take customers from a rival, and every franchisee has to live with food costs that won't come down. We saw what that looks like in practice: a 314-store Wendy's franchisee landed in bankruptcy court, and a former Wingstop operator explained, in unusual detail, what a franchise business is actually worth. Let's get into it.

TL;DR

  • McDonald's CEO: this is the new normal. He expects flat industry traffic and inflation to stay high "for many more years." Beef is up 14% in the past year and nearly 100% over five years. The stock fell about 5% on the day and is down roughly 29–30% from its February high. Squawk on the Street, 10AM
  • The plan is to take share in chicken and drinks, not to grow the pie. McDonald's already has about 40% of a ~$50 billion global beef-burger market, but only 20% of chicken ($130 billion) and 10% of beverages ($230 billion). The goal is 1.5 more points of share in chicken and beverages by 2030. Squawk on the Street, 10AM
  • Franchisees get money, and they have questions. McDonald's plans about $8.5 billion of franchisee support through 2036 and wants to add about $100,000 of cash flow per restaurant. The CEO admitted franchisees quickly asked about "the investment required, the payback period." Squawk on the Street, 9AM · 10AM
  • McDonald's still plays down GLP-1, for now. The CEO puts U.S. adult use at "around 10%" and says it isn't yet "a really meaningful impact," but he's planning for 20–30%. Portions will change even if visits don't. Squawk on the Street, 11AM
  • A 314-store Wendy's franchisee is in bankruptcy. Meritage Hospitality Group filed after Wendy's moved to terminate its agreement, claiming about $30 million in unpaid royalties and fees. It's the clearest sign yet of franchisee strain in the beef-burger business. Breaking Points
  • What a franchise business is worth. A former 20-unit Wingstop operator says seven stores did about $5.5 million in sales and ~$650,000 of EBITDA, and that "it's really hard to sell any collection of franchisees for more than 6x." Think Big, Buy Small
  • Burger King is "halfway through the recovery McDonald's is just starting," says value investor Jonathan Boyar. The Compound and Friends
  • Beef isn't easing, but other costs are. Cheese and butter are at their cheapest since January, and pork is at its cheapest in more than two years. That helps pizza and breakfast menus, not burgers. Markets to Menus

What's new

McDonald's stops waiting for the good times

Squawk on the Street had Kempczynski on for three separate hours on September 23, the morning of the investor day. Put together, those interviews are the clearest picture yet of how McDonald's sees the next five years.

The backdrop, in his words. In developed markets, "if you look over the last few years, industry traffic has been down and there's been elevated inflation." And he doesn't expect that to change: "We're not expecting that the industry all of a sudden is going to go to having robust traffic growth. We think that's going to be largely flat." On costs he was even blunter. He said the company had hoped inflation would cool in the second half of last year, and it didn't: "beef prices were up 14 percent. That was after record beef inflation years prior. If you think about over the last five years, beef prices are up almost 100 percent in our largest markets." His summary: "inflation is sticky. It's sticky, not just in the U.S., but around the world." (Squawk on the Street, 10AM Hour)

The answer: take share. "The biggest thing that you need to do in an environment like that is you have to be able to earn share. You have to be able to actually grab growth from your competitors." He sized the opportunity with three numbers. Beef is about a $50 billion global category, and McDonald's already holds about 40% of it, so there's little room left. Chicken is a $130 billion category where McDonald's has about 20%. Beverages are a $230 billion category where it has about 10%. The target is 1.5 more points of share in chicken and beverages by 2030. That's why Red Bull is now on McDonald's menus and why the investor day kept coming back to drinks. For the company overall, the goal is operating margins (profit as a share of revenue) in the "low to mid 50s" by 2030. (Squawk on the Street, 10AM Hour, 9AM Hour)

The nuts and bolts. In the 11AM hour, the numbers got more concrete. New restaurant openings grow 4–4.5% a year in 2026 and 2027, then slow to 3–3.5% from 2028 to 2030. Anchor Carl Quintanilla noted that new stores are expensive and redesigns make cost control hard. McDonald's is also targeting about 250 basis points (2.5 percentage points) of what it calls "gross restaurant level efficiency," mostly from technology. The examples were practical, not flashy. Crew members spend "two to three hours a week" typing in inventory by hand, and that's being automated. Kitchen equipment will be connected to the cloud so the system can predict breakdowns, including "that notorious shake machine." Voice ordering in the drive-thru is meant to move staff to the counter, not to cut them. One of the anchors wondered whether there is "a margin productivity story that's not being appreciated." (Squawk on the Street, 11AM Hour)

On GLP-1, a careful middle ground. Last week a researcher told us GLP-1 users go out to eat more, not less, but order differently. The McDonald's CEO landed in a similar place. Today, he said, the drugs aren't "a really meaningful impact on our business," with U.S. adult use "around 10%, maybe a little bit higher." Then came the warning: "imagine if that penetration rate gets to 20%, 30%." His read matches last week's data: "when people do go on GLP-1s, they still crave our food. They still love coming to McDonald's. But what they're buying, the portions that they're buying, that changes." So expect more grilled chicken and egg bites, not a smaller store count. (Squawk on the Street, 11AM Hour)

Why the stock fell anyway. Nothing he said was reckless. The problem is that "flat traffic, sticky inflation, spend to take share" is a harder story than the one investors wanted, which was "the value menu is working and things get easier from here." The stock was pacing for its worst day of the year and trading at its lowest since 2024. On The Compound and Friends (September 25), the hosts noted McDonald's is "down 29% over the last 144 days," a crash they said is very rare for a business of this quality. The last comparable drops came during COVID and the dot-com bust. (The Compound and Friends)

The quote spread well beyond restaurant podcasts, and the pundit reactions are worth a moment because they show how the message came across. On The Peter Schiff Show (September 24), Schiff read "inflation is going to be with us, unfortunately, many more years at elevated levels" as a direct rebuttal to the Fed: "McDonald's isn't buying what Warsh is selling." (The Peter Schiff Show) On The Loonie Hour (September 25), Steve Saretsky asked the question every restaurant investor should be asking: "if this company, with all the bandwidth, power, technology, leverage they have on the food chain can't... make food affordable, what about all these other chains?" (The Loonie Hour) That's commentary, not insider information. But he's right that it's the real read-across.

The franchisee bill comes due

The part of the investor day that matters most for the value war is also the least flashy: money for franchisees. On the 9AM hour, CNBC reported that McDonald's plans to support franchisees with "about eight and a half billion by 2036," and that it's targeting about $100,000 more cash flow per restaurant. (Squawk on the Street, 9AM Hour)

This matters because of the franchisee problem we've been tracking for weeks. McDonald's is about 95% franchised. When corporate launches a value plan, the independent owners running the stores pay for the discounts and the upgrades. The anchors said it plainly: some franchisees "rebel, don't want to invest the CapEx" (capital spending such as remodels and new equipment), and some are less willing to follow pricing directives. Quintanilla called it "wrangling cats." The CEO didn't dodge it: "in an environment where you don't have robust industry growth... and you also have elevated inflation. Certainly that's going to put pressure on margins. That's going to put pressure on the franchisees." He said more than 90% of the ~15,000 franchisees and suppliers at the June convention were excited about the strategy, "but of course, very quickly thereafter, there were all sorts of questions around the investment required, the payback period." (Squawk on the Street, 10AM Hour)

Read that as: McDonald's knows the value war can't be fought on franchisees' backs alone, so corporate is putting up the money. The $8.5 billion is the price of keeping the system together while prices stay high and customer counts stay flat.

Wendy's shows what happens when a franchisee breaks

Where McDonald's is paying to prevent trouble, Wendy's is already in it. On Breaking Points (September 23), the hosts covered an AP report that Meritage Hospitality Group, a Grand Rapids, Michigan operator with 314 Wendy's restaurants in 15 states and 9,000 employees, filed for bankruptcy protection. This came after Wendy's sent a termination notice effective September 16. Wendy's says Meritage owes almost $30 million in royalties and fees. The AP headline tied it directly to costs: "Wendy's faces 300 closures across 15 states due to crippling beef prices." Meritage says it plans to keep operating and paying staff during the bankruptcy. (Breaking Points)

A note on sources: Breaking Points is a political show, and the hosts' views are opinion. Still, their take on Wendy's position fits what we've heard all summer. They said Wendy's got caught in the middle of a "K-shaped" economy, where the top and bottom do fine and the middle gets squeezed. In their words, it was "better than McDonald's, but they weren't that good." Meanwhile, Shake Shack costs "a couple bucks more than Wendy's, but it's way, way better." They also played a clip of Agriculture Secretary Brooke Rollins saying "$6.50 for a pound of ground beef probably isn't that bad." That's a useful reminder of where retail beef prices are.

Why it matters: this is the first large franchisee failure in the burger segment during this cycle. It's the "franchisee squeeze" side of our weekly debate turning into court filings. When one of a brand's biggest operators can't pay royalties, the brand either takes the stores back, finds a new operator, or closes them. All three hurt near-term unit counts and royalty income. Watch whether other large beef-heavy franchisees show similar strain.

What a franchise is actually worth

For a rare look at franchise economics from the operator's side, the best listen this week was a small-business podcast. On Think Big, Buy Small (September 21), a former Wingstop franchisee described building and selling a 20-restaurant group in Ohio. (Think Big, Buy Small)

The numbers: his first purchase was every Wingstop in Columbus, seven stores doing "a little more than five and a half million in revenue." The seller claimed about $700,000 of EBITDA (a rough measure of cash profit before interest, taxes and depreciation). He thought it "probably was closer to 625, 650." That's roughly an 11–12% store-level cash margin, so thin that one bad year of chicken-wing costs can wipe it out. He signed a deal to build five more, bought all seven Cincinnati stores, took over a struggling store in Dayton, and ended at 20.

Two points stood out for anyone who owns franchisor stocks:

  • Incentives aren't aligned. "Those royalties are on top-line revenue, not on profits." The franchisor "would love to see you open another restaurant just down the street because every amount of sales that that generates is additive to them. But that restaurant probably steals a bunch of business from your other one." That's the hidden tension behind every "unit growth" target, McDonald's 4–4.5% included.
  • Franchise businesses have a price ceiling. A three-unit quick-service group with about $1 million of cash flow might sell for 4–5x. Moving up each size tier (under $1 million, $1–2 million, $2–5 million) adds maybe 0.5–1x. The host summed it up: "It's really hard to sell any collection of franchisees for more than 6x," partly because the franchisor has to approve the buyer. For comparison, the franchisor stocks themselves have traded at much higher multiples. The gap between what a franchisee's stores sell for and what the brand trades at is the price of being the one who carries the costs.

The debate: does the value war pay?

The case that it's a losing game. Take McDonald's at its word and the picture is sobering. Industry traffic won't grow. Beef costs have nearly doubled in five years. The only way to grow is to take share. And winning share costs money: $8.5 billion of franchisee support, remodels, new equipment and AI systems. Meanwhile, a 314-store Wendy's operator just collapsed under beef costs and unpaid royalties, and a Wingstop operator's numbers show store-level cash margins of about 11–12%. In this view the value war is a transfer. Profit leaves franchisees and shareholders and goes to customers, while real traffic barely moves.

The case that it's the only game, and the strongest brands win it. If the pie really is flat, the operators with the most scale can spend their way to share while weaker rivals can't. That's exactly what Jonathan Boyar argued about Burger King on The Compound and Friends (September 25). Its franchisees "weren't happy," unit economics were poor, and same-store sales were weak. Under executive chair Patrick Doyle, the former Domino's CEO, they've improved, and Burger King is now "halfway through the recovery that McDonald's is just starting" despite "20%, 25% beef inflation." (The Compound and Friends) In this view Meritage isn't a warning for the whole system. It's what happens to a weak operator at a middling brand. McDonald's is making the same bet: use technology savings (the 250-basis-point efficiency target) to fund value without hurting franchisees.

Where we land. Both sides agree on the facts: flat traffic, high costs, winners taking share from losers. They disagree on who pays. This week tilted the answer. The strongest franchisors are paying (McDonald's is funding its operators), while franchisees at weaker brands pay for themselves (Wendy's). That makes the franchisor's balance sheet and franchisee health the key things to watch, more than the value-menu price.

The names in play

McDonald's (MCD). The bear case is in the CEO's own words: flat traffic and inflation for "many more years," expensive new stores, unit growth slowing to 3–3.5% after 2027, and a franchisee base that needs billions of support. The bull case is that McDonald's is the one company big enough to pay for the fight, with clear share targets in huge categories where it's under-represented (chicken, beverages), a credible technology cost story, and a stock down about 30% from February, which our pundit hosts called a rare crash for a business this good. The next catalyst is the Q3 report, where the question is whether U.S. guest counts, negative last quarter, have stopped falling. (Squawk on the Street, 10AM, 11AM, The Compound and Friends)

Wendy's (WEN). The weakest position of the week. A 314-store franchisee is in bankruptcy, about $30 million in royalties is in dispute, and the AP headline warned of possible closures in 15 states. Wendy's is beef-heavy, stuck in the middle of the market, and now facing an ugly franchisee fight in public. What to watch: whether those stores get re-franchised or closed, and what that does to unit counts and royalty income. (Breaking Points)

Restaurant Brands (QSR). The value investor's pick. Boyar's view is that Burger King's turnaround is a year or two ahead of McDonald's, with a 3–4% dividend yield while you wait and an enterprise value of about $45 billion. It "got sold off the past couple of days" along with McDonald's, which is the risk: beef inflation hits Burger King as hard as anyone. (The Compound and Friends)

Read-throughs

Franchisees. Three data points this week line up. McDonald's is funding its operators, a Wendy's operator failed, and a Wingstop operator described thin cash margins and a ~6x ceiling on what franchise groups sell for. The pattern: franchisee health now depends on whose brand you run. Operators at brands that invest in them can survive flat traffic. Operators at stretched, beef-heavy brands in the middle of the market can't. (Squawk on the Street, 9AM, Breaking Points, Think Big, Buy Small)

Protein and commodities: beef stays high, other costs ease. On Markets to Menus (September 24), ArrowStream's food-cost analysts said their overall commodity index was flat and slightly below a year ago. That's not the picture you'd get from beef alone. Cheese and butter are at their cheapest since January, which helps pizza. Pork is at its cheapest in more than two years, with pork bellies (bacon) near three-year lows after a 25% drop in one week. Grains are still about 30% above last year. On chicken, young-bird slaughter fell 4% from a year ago and producers are slowing output, a possible early sign that chicken prices could firm up just as McDonald's and everyone else try to sell more of it. (Markets to Menus)

Restaurant tech. McDonald's technology agenda (AI inventory, connected equipment, voice ordering) is the big-company version of what we heard from independents last week. At Toast, the VP of Product told The Product Podcast (September 25) that restaurant customers have "such a low tolerance for doing AI for AI's sake. And they don't care at all if it's AI or Toast IQ or whatever. All they care about is, did you help me with my business?" The shift is from "help me do this" to "do this for me," for example making bulk menu price changes. (The Product Podcast) A fast-casual operator on Restaurant Rockstars (September 27) described the unglamorous version that actually saves money: labor budgeted as a dollar allowance per hour ("$50 worth of labor from 8 o'clock to 9 o'clock on a Monday morning"), split shifts to avoid the dead 2-to-5pm stretch, and strict portion control, because "your three-ounce scoop might be my five-ounce scoop." (Restaurant Rockstars)

Casual dining and fast casual: good businesses, expensive stocks. On Morningstar's The Morning Filter (September 21), previewing Darden's earnings, the strategist described Darden as a view across the whole consumer base. Olive Garden (~43% of sales) serves middle-income diners and has benefited from "a pretty good amount of trade down." LongHorn (~25%) is the "affordable indulgence" steak option. Fine dining (~21%) serves higher-income customers doing well on market gains. His bigger point: Morningstar's fair value for Darden is $156, "shares are trading well above that," and "a lot of these restaurant stocks are overvalued at this point." The exceptions are Wingstop and Chipotle, which "have now come down enough" to near fair value. (The Morning Filter) On growth, CAVA's brand strategy lead told The Speed of Culture (September 22) the chain has about 470 restaurants and aims for 1,000 by 2032, with the Bay Area opening next year. (The Speed of Culture)

What changed vs last week

Last week McDonald's own Q2 numbers confirmed it lost customers. This week management answered, and the answer was more sobering than hopeful: no recovery in industry traffic, years of inflation, and a costly push to take share in chicken and beverages. The value war is no longer a temporary campaign. McDonald's is treating it as permanent.

Two things are new. First, franchisee strain has gone from theory to fact. We've been saying for weeks that discounting hurts operators, and now there's a 314-store bankruptcy at Wendy's and an $8.5 billion support plan at McDonald's. Second, the GLP-1 picture converged. McDonald's own CEO now echoes last week's research: visits hold up, portions shrink, and the risk grows as usage climbs from about 10% toward 20–30%.

Beef is still the constant, with no relief anywhere. What's newly visible is that other food costs (cheese, pork, butter) are easing, so the squeeze is increasingly a burger-chain problem rather than an industry-wide one.