The simple version

Two different kinds of payment arrive from an outlet somebody else runs, and they answer to two different things.

One is a share of what that outlet sells. It rises and falls with the operator's takings, which is what most people picture.

The other is rent on the site itself, because the site is the company's. Rent of this kind usually has a floor written into it, so below a certain level of trade it stops falling.

The numbers

• McDonald's Corporation reported revenues from franchised restaurants of $4,487 million for the quarter ended September 30, 2026, up 3 percent from $4,363 million, in exhibit 99.1 to a Form 8-K filed November 4, 2026, accession 0000063908-26-000080.
• The same condensed consolidated statement of income shows an operating cost line reading Franchised restaurants-occupancy expenses of $687 million for the quarter, up 3 percent from $666 million.
• Sales by Company-owned and operated restaurants were $2,480 million, down 3 percent from $2,563 million. Total revenues were $7,157 million, up 1 percent.
• Global comparable sales rose 1.5 percent for the quarter while United States comparable sales fell 0.2 percent. Systemwide sales rose 4 percent to over $38 billion.
• The release states that the company's revenues consist of sales by Company-owned and operated restaurants and fees from franchised restaurants operated by conventional franchisees, developmental licensees and affiliates, and that franchised sales are the basis on which franchised revenues are calculated and recorded.
• The Form 10-K for the fiscal year ended December 31, 2025 states that for a conventional franchise the company generally owns or secures a long-term lease on the land and building for the restaurant location.
• That same filing states that revenues from conventional franchised restaurants include rent and royalties based on a percent of sales with minimum rent payments, and initial fees.
• The 10-K reports total franchised revenues of $16,548 million for 2025 and does not break that figure into rent, royalties and initial fees. We looked in both documents and found no split, so no figure here separates the two.

Why the site matters more than the name

A payment calculated as a share of trade is a bet on the operator. Good year, bigger payment; bad year, smaller one. The two parties move together.

Rent with a floor behaves differently. Above the floor it moves with trade like the first payment, and below it the floor takes over and the figure stops responding.

So the party holding the site has converted part of a variable claim into a fixed one. The operator keeps the whole of the downside below that point, and the company keeps the same payment.

That is also why the cost of occupying those outlets turns up as the company's own expense. It is paying for sites it then supplies onward, and both that cost and the rent coming back sit inside figures the filing does not split.

The actual math on a $1,000,000 outlet

Take an outlet turning over $1,000,000 a year, a trade-based payment of 5 percent, and rent set at 8 percent of trade with a floor of $60,000. Every one of those figures is ours and none of them appears in either filing.

At $1,000,000 the trade-based payment is $50,000 and the rent is $80,000, since 8 percent clears the floor. The company collects $130,000.

Now let trade fall to $600,000. The trade-based payment drops to $30,000, and 8 percent of trade comes to $48,000, which is under the floor, so the rent stays at $60,000. The company collects $90,000.

Trade fell 40 percent and what the company collected fell about 31 percent. The gap is the floor doing its work, and it is the whole reason this structure is worth understanding.

What this means

When a business earns from premises as well as from trade, the two halves behave differently in a downturn and the reported total hides which is which. A figure that falls less than the trade beneath it usually has something fixed inside it.

It also means the operator and the owner are not equally exposed. Reading a franchise agreement, the question is not only what percentage is charged but what the smallest possible payment is in a bad year.

The transferable habit is to ask what inside a payment cannot go down. Anything with a floor under it is a different kind of claim from the part that floats, even when both arrive on the same day in the same figure.

What this is NOT

This article explains why a company whose outlets are run by independent operators reports the cost of occupying them, and what a minimum rent payment does to the money it collects, using McDonald's Corporation's exhibit 99.1 to a Form 8-K filed November 4, 2026 and its Form 10-K for the fiscal year ended December 31, 2025, both read on November 4, 2026, as the worked example. The $1,000,000 of trade, the 5 percent, the 8 percent and the $60,000 floor are all ours and appear in neither filing, and neither filing splits franchised revenues between rent, royalties and initial fees. It is not a recommendation to buy, sell or hold any security, not a view on any company, and not a claim that any arrangement is unfair or improper: the structure is disclosed in the filings. It is not advice about entering any franchise agreement, which is a legal and financial question for a qualified adviser and depends on terms this article has not read. The separate question of whose sale lands on whose revenue line is covered in the linked article on company-operated and licensed stores. This is not a political endorsement or criticism of anyone.

Sources

• McDonald's Corporation, exhibit 99.1 to Form 8-K, third quarter 2026 results, filed with the Securities and Exchange Commission November 4, 2026, accession 0000063908-26-000080: revenues from franchised restaurants, the franchised restaurants occupancy expenses line, sales by Company-owned and operated restaurants, total revenues, comparable sales, systemwide sales, and the definitions of systemwide sales and of the company's revenues. Read November 4, 2026: https://www.sec.gov/Archives/edgar/data/0000063908/000006390826000080/exhibit991-9302026.htm
• McDonald's Corporation, Form 10-K for the fiscal year ended December 31, 2025, accession 0000063908-26-000035: that the company generally owns or secures a long-term lease on the land and building, that conventional franchised revenues include rent and royalties based on a percent of sales with minimum rent payments and initial fees, and total franchised revenues of $16,548 million with no split disclosed. Read November 4, 2026: https://www.sec.gov/Archives/edgar/data/63908/000006390826000035/mcd-20251231.htm