UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

 ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to        

Commission File Number 1-5231

McDONALD’S CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	36-2361282
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
110 North Carpenter Street, Chicago, Illinois	60607
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (630) 623-3000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	MCD	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ☒  No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes ☐  No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☒         Accelerated filer  ☐ Non-accelerated filer  ☐

Smaller reporting company  ☐ Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes ☐  No ☒

The aggregate market value of the registrant's common stock held by non-affiliates as of June 30, 2021: $172,462,195,915.

The number of shares outstanding of the registrant’s common stock as of January 31, 2022: 743,584,718.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of this Form 10-K incorporates information by reference from the registrant’s 2022 definitive proxy statement, which will be filed no later than 120 days after December 31, 2021.

McDONALD’S CORPORATION

TABLE OF CONTENTS

ORGANIZATION OF THIS ANNUAL REPORT ON FORM 10-K

The order and presentation of content in this Annual Report on Form 10-K ("Form 10-K") differs from the traditional U.S. Securities and Exchange Commission ("SEC") Form 10-K format. McDonald's Corporation believes the format used in this Form 10-K improves readability and better presents how it organizes and manages its business. See "Form 10-K Cross-Reference Index" for a cross-reference index to the traditional SEC Form 10-K format.

Page
Forward-Looking Statements	3
About McDonald's	3
Business Summary	3
Management's Discussion and Analysis of Financial Condition and Results of Operations	8
Management's View of the Business	8
Financial Performance	8
Strategic Direction	9
Outlook	10
Consolidated Operating Results	11
Cash Flows	19
Financial Position and Capital Resources	22
Other Matters	24
Other Key Information	25
Five-Year Summary	25
Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	27
Risk Factors	28
Legal Proceedings	34
Properties	35
Information About Our Executive Officers	36
Availability of Company Information	37
Financial Statements and Supplementary Data	37
Controls and Procedures	64
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	64
Exhibits and Financial Statement Schedules	65
Form 10-K Cross-Reference Index	68
Signatures	69

All trademarks used herein are the property of their respective owners and are used with permission.

FORWARD-LOOKING STATEMENTS

The information in this report contains forward-looking statements about future events and circumstances and their effects upon revenues, expenses and business opportunities. Generally speaking, any statement in this report not based upon historical fact is a forward-looking statement. Forward-looking statements can also be identified by the use of forward-looking or conditional words, such as “could,” “should,” “can,” “continue,” “estimate,” “forecast,” “intend,” “look,” “may,” “will,” “expect,” “believe,” “anticipate,” “plan,” “remain,” “confident” and “commit” or similar expressions. In particular, statements regarding plans, strategies, prospects and expectations regarding the business and industry are forward-looking statements. They reflect expectations, are not guarantees of performance and speak only as of the dates the statements are made. Factors that could cause actual results to differ materially from those in the forward-looking statements include those reflected in the Risk Factors section on page 28 of this Form 10-K and elsewhere in McDonald's Corporation's filings with the SEC. Except as required by law, McDonald's Corporation does not undertake to update such forward-looking statements. You should not rely unduly on forward-looking statements.

ABOUT McDONALD'S

McDonald’s Corporation, the registrant, together with its subsidiaries, is referred to herein as the "Company." The Company, its franchisees and suppliers are referred to herein as the "System."

BUSINESS SUMMARY

GENERAL

For the year ended December 31, 2021, there were no material changes to the Company's corporate structure or in its method of conducting business. Refer to the Segment and Geographic Information section on page 50 of this Form 10-K for additional information.

DESCRIPTION OF THE BUSINESS

The Company franchises and operates McDonald’s restaurants, which serve a locally relevant menu of quality food and beverages in communities across 119 countries. Of the 40,031 McDonald's restaurants at year-end 2021, 37,295, or 93%, were franchised.

The Company’s reporting segments are aligned with its strategic priorities and reflect how management reviews and evaluates operating performance. Significant reportable segments include the United States ("U.S.") and International Operated Markets. In addition, there is the International Developmental Licensed Markets & Corporate segment, which includes markets in over 80 countries, as well as Corporate activities.

McDonald’s franchised restaurants are owned and operated under one of the following structures - conventional franchise, developmental license or affiliate. The optimal ownership structure for an individual restaurant, trading area or market (country) is based on a variety of factors, including the availability of individuals with entrepreneurial experience and financial resources, as well as the local legal and regulatory environment in critical areas such as property ownership and franchising. The business relationship between McDonald’s and its independent franchisees is supported by adhering to standards and policies, including Global Brand Standards defined in 2021, and is of fundamental importance to overall performance and to protecting the McDonald’s brand.

The Company is primarily a franchisor and believes franchising is paramount to delivering great-tasting food, locally relevant customer experiences and driving profitability. Franchising enables an individual to be their own employer and maintain control over all employment related matters, marketing and pricing decisions, while also benefiting from the strength of McDonald’s global brand, operating system and financial resources.

Directly operating McDonald’s restaurants contributes significantly to the Company's ability to act as a credible franchisor. One of the strengths of the franchising model is that the expertise from operating Company-owned restaurants allows McDonald’s to improve the operations and success of all restaurants while innovations from franchisees can be tested and, when viable, efficiently implemented across relevant restaurants. Having Company-owned and operated restaurants provides Company personnel with a venue for restaurant operations training experience. In addition, in Company-owned and operated restaurants, and in collaboration with franchisees, the Company is able to further develop and refine operating standards, marketing concepts and product and pricing strategies that will ultimately benefit McDonald’s restaurants.

The Company’s revenues consist of sales by Company-operated restaurants and fees from restaurants operated by franchisees. Fees vary by type of site, amount of Company investment, if any, and local business conditions. These fees, along with occupancy and operating rights, are stipulated in franchise/license agreements that generally have 20-year terms. The Company’s Other revenues are comprised of technology fees paid by franchisees, revenues from brand licensing arrangements and third-party revenues for the Dynamic Yield business.

Conventional Franchise

Under a conventional franchise arrangement, the Company generally owns or secures a long-term lease on the land and building for the restaurant location and the franchisee pays for equipment, signs, seating and décor. The Company believes that ownership of real estate, combined with the co-investment by franchisees, enables us to achieve restaurant performance levels that are among the highest in the industry.

Franchisees are responsible for reinvesting capital in their businesses over time. In addition, to accelerate implementation of certain initiatives, the Company may co-invest with franchisees to fund improvements to their restaurants or operating systems. These investments, developed in collaboration with franchisees, are designed to cater to consumer preferences, improve local business performance and increase the value of the Company's brand through the development of modernized, more attractive and higher revenue generating restaurants.

The Company requires franchisees to meet rigorous standards and generally does not work with passive investors. The business relationship with franchisees is designed to facilitate consistency and high quality at all McDonald’s restaurants. Conventional franchisees

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contribute to the Company’s revenue, primarily through the payment of rent and royalties based upon a percent of sales, with specified minimum rent payments, along with initial fees paid upon the opening of a new restaurant or grant of a new franchise. The Company's heavily franchised business model is designed to generate stable and predictable revenue, which is largely a function of franchisee sales, and resulting cash flow streams.

Developmental License or Affiliate

Under a developmental license or affiliate arrangement, licensees are responsible for operating and managing their businesses, providing capital (including the real estate interest) and developing and opening new restaurants. The Company generally does not invest any capital under a developmental license or affiliate arrangement, and it receives a royalty based on a percent of sales, and generally receives initial fees upon the opening of a new restaurant or grant of a new license.

While developmental license and affiliate arrangements are largely the same, affiliate arrangements are used in a limited number of foreign markets (primarily China and Japan) within the International Developmental Licensed Markets segment as well as a limited number of individual restaurants within the International Operated Markets segment, where the Company also has an equity investment and records its share of net results in equity in earnings of unconsolidated affiliates.

PURPOSE, MISSION AND VALUES

Through its size and scale, McDonald's embraces and prioritizes its role and commitment to the communities in which it operates through its:

•Purpose to feed and foster communities;

•Mission to create delicious feel-good moments for everyone; and

•Core Values that define who we are and how we run our business.

At McDonald's, we are guided by our five core values:

1.Serve – We put our customers and people first;

2.Inclusion – We open our doors to everyone;

3.Integrity – We do the right thing;

4.Community – We are good neighbors; and

5.Family – We get better together.

The Company believes that its people, all around the world, set it apart and bring these values to life on a daily basis.

HUMAN CAPITAL MANAGEMENT

The Company’s people strategies aim to create an environment grounded in diversity, equity and inclusion—to continually evaluate and evolve compensation and benefits programs, while offering quality training and learning opportunities, and to uphold a high standard of health and safety for employees and customers alike.

You can find more information about the Company's human capital management and related initiatives on the “Our Purpose & Impact” section of its website, which is updated periodically as such matters evolve.

Our People

Company employees, which include those in the Company's corporate and other offices as well as in Company-owned and operated restaurants, totaled approximately 200,000 worldwide as of year-end 2021, of which over 75% were based outside of the U.S. In addition to Company employees, the over two million individuals who work in McDonald's franchised restaurants around the world are critical to the Company’s success, enabling it to drive long-term value creation and further its purpose and mission. People are at the cornerstone of the Company's business and an essential part of the McDonald's System.

Diversity, Equity and Inclusion

The Company's aspiration is that no matter where you are in the world, when you interact with McDonald’s, diversity, equity and inclusion (“DEI”) are as evident and familiar as the Arches themselves. A diverse workforce is and will continue to be critical to McDonald’s success, and the Company is committed to making this a continued priority. Under the leadership of its Board of Directors, the Company adheres to a global DEI strategy designed to drive accountability across the System to better represent the diverse communities in which McDonald’s operates, to accelerate cultures of inclusion and belonging and to further dismantle barriers to economic opportunity.

The Company’s DEI strategy reflects its commitment to deliver equitable treatment for all people and includes:

•ongoing efforts to improve the representation of women and historically underrepresented groups at all levels of the Company;

•a recruitment initiative to help increase the number of franchisees from all backgrounds, including historically underrepresented groups;

•best practice sharing with franchisees and suppliers to support them in furthering DEI progress within their own organizations;

•upholding human rights and cultivating a respectful workplace that is ethical, truthful and dependable; and

•a commitment to equitable pay among Company employees with comparable job responsibilities, experience, performance and contributions and fair treatment in access, opportunity and advancement for all.

While McDonald’s is proud of its more than 65-year history as an employer, this global DEI strategy is designed to facilitate continued growth in how the Company approaches equitable opportunity and its role in catalyzing it across the System and beyond. The Company is committed to accelerating representation, inclusion and opportunity for historically underrepresented groups, not only within the Company but across the System. This goal is underscored by the Company's Mutual Commitment to Diversity, Equity and Inclusion, a pledge that invites the Company’s U.S. suppliers to commit to accountability for DEI progress within their own organizations. Aligned with the

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Company's purpose, mission and values, the Mutual Commitment draws on McDonald's size and scale and highlights its opportunity to accelerate meaningful change for employees, franchisees, suppliers, customers and communities.

Beginning in 2021, the Company began incorporating quantitative representation metrics for leadership into the calculation of annual incentive compensation for its executives. In addition to the Company’s financial performance, executives are now measured on a variety of quantitative metrics related to championing the Company's core values, improving representation within leadership roles (Senior Director and above) for women and other historically underrepresented groups and assessing feelings of inclusion within the Company.

Also in 2021, the Company launched a franchisee recruitment initiative to help increase the number of franchisees from all backgrounds, including historically underrepresented groups, in the Company's U.S. and International Operated Markets segments. The Company expects to expand the number of new franchisees through efforts in three areas: recruitment, financing, and ongoing learning and development. This effort—tailored for each market—will seek to increase ownership opportunities for new talent worldwide, both in terms of the number of individual restaurants owned and the number of qualified franchisees overall. The Company has committed $250 million in the U.S. over five years to provide alternatives to traditional financing in order to help candidates—who may face socio-economic barriers—join the McDonald’s System.

In order to support this DEI strategy with measurable data and transparent reporting, the Company published its first Diversity Snapshot in December 2021, which included data on employee, Board and franchisee representation and supplier diversity. As the Company progresses on its journey of accountability and transparency, it will continue to identify opportunities to further enhance its processes for collecting data and reporting measurable progress toward its DEI goals.

Workplace Health and Safety

McDonald’s has always focused on protecting the health and safety of its people and customers. In early 2020, in response to the global COVID-19 pandemic, the Company established a framework called Safety+ in order to foster an environment where restaurant crew feel safe and supported, and customers have a variety of choices for contactless order and payment. Throughout 2021, the Company has continued to make informed decisions and apply appropriate precautionary measures to adapt to new and evolving safety risks, with guidance from expert health authorities in most of the countries in which it operates, as well as the World Health Organization. Further, the Company continued its engagement of Mayo Clinic, a global leader in serious and complex healthcare, to provide ongoing counsel and expertise on emerging science in infection prevention and control, and to identify best practices to help protect restaurant crew and customers. All of these efforts build upon the work McDonald’s has been committed to for decades, rooted in its core value of putting its customers and people first.

Respectful Workplace Environment

Fostering safe, inclusive and respectful workplaces, wherever McDonald's does business, has been integral to the Company for its more than 65-year history. The Company understands the importance of providing a positive experience and making everyone feel valued, both in its offices and in McDonald's restaurants. In 2018, the Company introduced McDonald's Human Rights Policy, which outlines its commitment to respect its people and their rights. This commitment to respect human rights is also furthered by the Company's Standards of Business Conduct, which apply to Company employees, and its Supplier Code of Conduct, which sets forth human rights requirements for the Company's global suppliers. Company employees are trained on the Standards of Business Conduct and are required to annually certify their understanding of and commitment to upholding them. Further, in 2021 the Company announced a newly defined set of Global Brand Standards that extend requirements to all restaurants, whether Company-owned or franchised. The Global Brand Standards prioritize actions in four areas: harassment, discrimination and retaliation prevention; workplace violence prevention; restaurant employee feedback; and health and safety. Beginning in 2022, all restaurants will be assessed on the Global Brand Standards in accordance with the applicable McDonald’s market’s business evaluation processes.

As part of its commitment to a respectful workplace environment, the Company recognizes how important it is to provide channels for its employees to report human rights and similar concerns that may violate Company policies and standards. Employees can do so in many ways, including through an anonymous global channel, the Business Integrity Line, which is staffed by a live operator from an independent company and is available 24 hours a day, 365 days a year. This is complemented by additional reporting channels in many markets. The Company expects its employees and franchisees to uphold human rights and cultivate respectful workplaces, which builds trust, protects the integrity of the McDonald's brand and fuels Systemwide success.

Compensation, Benefits and Talent Development

The compensation and benefits provided to U.S. and internationally-based Company employees, including both corporate staff and Company-owned restaurant employees, is established based upon competitive considerations in the relevant labor market. The amount and type of compensation varies by an employee's level and location, and may include some combination of the following (in addition to base pay): cash bonuses, stock-based awards, retirement savings programs, and health and welfare benefits. In addition, Company employees may receive paid time off, family care resources, tuition assistance and flexible work schedules.

In 2021, the Company publicly communicated its ongoing commitment to equal pay, which is supported by an annual pay gap analysis that aims to ensure equitable pay practices are consistently implemented and executed across the Company. The results of the 2021 pay gap analysis showed that the Company has substantially attained equal pay for women globally (99.85%) and that there was no pay gap disfavoring historically underrepresented groups in the U.S. In line with its core values, the Company continuously emphasizes the importance of pay that is competitive, non-discriminatory, performance-based, transparent and compliant with legal and regulatory standards.

Additionally, McDonald’s has a long-standing commitment to providing training, education benefits and career path opportunities, which empower the people and communities it serves. The Company is committed to providing opportunities for people to enhance their skills and fulfill their potential through talent development programs, apprenticeship opportunities, language and technical skill training and support for continuing education, as it believes this helps to facilitate talent attraction, career development and retention. Further, McDonald’s Hamburger University has eight campuses around the world to provide training for Company employees as well as franchisees and their

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eligible employees. These are just a few examples of the important role education plays in the Company's business and the communities McDonald's serves.

Communities

McDonald’s embraces its role and commitment to the communities it serves. Through its Youth Opportunity program, the Company aims to reduce barriers to employment for two million young people by 2025 through pre-employment job readiness training, employment opportunities and workplace development programs. The Company is also proud to support the network of over 260 local chapters of Ronald McDonald House Charities (“RMHC”) spanning over 60 countries and regions that creates, finds and supports programs that directly improve the health and well-being of children and their families. In 2020, the Company announced a five-year, $100 million commitment to RMHC.

In addition, the Company maintains a Global Food Disposition Policy to help support its suppliers and distributors around the world in disposing of food in alignment with McDonald’s food waste hierarchy, including by enabling food donations wherever possible. This policy, which aims to avoid food waste and loss while also allowing the System to meet the needs of local communities, is a critical part of the Company's sustainability work and its purpose to feed and foster communities.

ENVIRONMENTAL MATTERS

The Company prioritizes action and progress across a range of environmental matters, and endeavors to improve its long-term sustainability and resiliency, which benefit the System and the communities McDonald's serves. The Company monitors environmental regulations and stakeholder expectations in order to be well-positioned to respond in a timely and appropriate manner, as it cannot predict the precise nature of how these matters will continue to evolve. Although any impact would likely vary by geographic region and/or market, the adoption of new environmental laws or regulations may increase costs and/or operational complexity for the Company.

To guide its management of environmental matters and to strengthen its resiliency, the Company has developed goals and commitments that are informed by relevant frameworks, including the Taskforce on Climate-Related Financial Disclosures. These include initiatives to reduce Systemwide greenhouse gas emissions, eliminate deforestation from the Company's global supply chain, efficiently manage natural resources, responsibly source ingredients and packaging and increase the availability of recycling in restaurants to reduce waste, which are areas of increasing importance to the Company and its stakeholders and where the Company believes it can have a significant impact and help to drive industry-wide change. In recent years, the Company has made significant progress on many of its global goals and commitments. You can find more information about these initiatives, as well as other environmental sustainability matters, on the “Our Purpose & Impact” section of the Company's website, which is updated periodically as progress and performance updates become available. Information can also be found in the Company's annual Climate Change, Forests and Water reports submitted to CDP, an organization that helps companies manage their environmental impacts, and in the Company's first Climate Risk & Resiliency Summary.

The Company is conducting and analyzing climate scenario modeling to continue to identify and further understand potential risks and opportunities and is working with expert partners to evaluate the potential significant impacts and implications for the System. The Company will continue to assess potential risks and opportunities to analyze possible significant impacts to the System because it believes taking action on environmental matters will drive long-term business value by ensuring that it is managing operational costs in its energy supply, improving the security of its raw material supply, stewarding the environment in its surrounding communities and reducing its exposure to increasing environmental risks, regulation and costs.

SUPPLY CHAIN, FOOD SAFETY AND QUALITY

The Company and its franchisees purchase food, packaging, equipment and other goods from numerous independent suppliers. The Company has established and enforces high food safety and quality standards and maintains quality centers around the world designed to promote consistency of these high standards. The quality management systems and processes involve ongoing product reviews, virtual supplier visits and third-party verifications. A Food Safety Advisory Council, comprised of the Company’s internal food safety experts as well as suppliers and outside academics, provides strategic global leadership for all aspects of food safety and quality. The Company also has ongoing programs to educate employees about food safety practices, including proper storage, handling and preparation of food for customers, and conducts trainings for its suppliers and restaurant operators to share best practices on food safety and quality.

The Company works closely with suppliers to encourage innovation and drive continuous improvement across its global supply chain. Leveraging its scale, supply chain infrastructure and risk management strategies, the Company collaborates with suppliers on contingency planning to achieve continuous supply and competitive, predictable costs over the long term. The Company also works closely with suppliers and other third-party experts to drive sustainable sourcing initiatives, including the environmental matters discussed above and improving the health and welfare of the animals within its supply chain. Led by its Chief Supply Chain Officer, the Company has developed and implemented a comprehensive strategy that its global supply chain organization leverages to identify, assess and manage risk in its supply chain.

To reinforce the importance of its values, the Company maintains a Supplier Code of Conduct that applies to all of its suppliers around the world. The Company expects all of its suppliers to meet the rigorous standards set forth in the Code, which cover areas including human rights, workplace environment, business integrity and environmental management. In addition, the Company has a comprehensive Supplier Workplace Accountability (SWA) program to help suppliers understand its expectations, verify compliance and work toward continuous improvement.

PRODUCTS

McDonald’s restaurants offer a substantially uniform menu, although there are geographic variations to suit local consumer preferences and tastes.

McDonald’s menu includes hamburgers and cheeseburgers, Big Mac, Quarter Pounder with Cheese, Filet-O-Fish, several chicken sandwiches, Chicken McNuggets, wraps, McDonald's Fries, salads, oatmeal, shakes, McFlurry desserts, sundaes, soft serve cones, bakery items, soft drinks, coffee, McCafé beverages and other beverages.

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McDonald’s restaurants in the U.S. and many international markets offer a full or limited breakfast menu. Breakfast offerings may include Egg McMuffin, Sausage McMuffin with Egg, McGriddles, biscuit and bagel sandwiches, oatmeal, breakfast burritos and hotcakes.

In addition to these menu items, restaurants sell a variety of other products during limited-time promotions.

Taste, quality, choice, value and nutrition are important to customers, and the Company is continuously evolving its menu to meet its customers' needs, including testing new products on an ongoing basis.

MARKETING

McDonald’s global brand is well known. Marketing, promotional and public relations activities are designed with customers in mind and are focused on promoting the McDonald’s brand and differentiating the Company from its competitors. Marketing and promotional efforts focus on value, quality, food taste, menu choice, nutrition, convenience, cultural relevance and the customer experience.

INTELLECTUAL PROPERTY

The Company owns or is licensed to use valuable intellectual property, including trademarks, service marks, patents, copyrights, trade secrets and other proprietary information. The Company considers the "McDonald's" trademark and the Golden Arches Logo to be of material importance to its business. Depending on the jurisdiction, trademarks and service marks generally are valid as long as they are used and/or registered. The Company's patents, copyrights and licenses are of varying durations.

COMPETITION

McDonald’s restaurants compete with international, national, regional and local retailers of traditional, fast casual and other food service competitors. The Company competes in the quick-service restaurant industry on the basis of price, convenience, service, experience, menu variety and product quality in a highly fragmented global restaurant industry.

In measuring the Company’s competitive position, management reviews data compiled by Euromonitor International, a leading source of market data with respect to the global restaurant industry. The Company measures itself using the informal eating out ("IEO") segment information, which is inclusive of the Company’s primary competition of quick-service restaurants. The IEO segment includes the following restaurant categories defined by Euromonitor International: limited-service restaurants (which combines quick-service eating establishments and 100% home delivery/takeaway providers), street stalls or kiosks, cafés, specialist coffee shops, self-service cafeterias and juice/smoothie bars. The IEO segment excludes establishments that primarily serve alcohol and full-service restaurants other than providers with limited table service.

Based on data from Euromonitor International, the global IEO segment was composed of approximately 10 million outlets and generated $1 trillion in annual sales in 2020, the most recent year for which data is available. In 2020, McDonald’s Systemwide restaurant business accounted for 0.4% of those outlets and 9.3% of those sales.

Management also on occasion benchmarks McDonald’s against the entire restaurant industry, including the IEO segment defined above and all full-service restaurants. Based on data from Euromonitor International, the restaurant industry was composed of approximately 19 million outlets and generated $2 trillion in annual sales in 2020. In 2020, McDonald’s Systemwide restaurant business accounted for 0.2% of those outlets and 4.6% of those sales.

GOVERNMENT REGULATIONS

The Company has global operations and is therefore subject to the laws of the United States and many foreign jurisdictions in which it operates and the rules and regulations of various governing bodies, which may differ among jurisdictions. Throughout 2020 and 2021, markets experienced varying levels of government restrictions on restaurant operating hours, limited dine-in capacity, dining room closures and, primarily in 2020, some instances of full restaurant closures. These government restrictions affected the Company's revenues for both periods, with results for 2021 reflecting recovery due to the greater impact of COVID-19 restrictions in 2020. As most revenues are based on a percent of sales, government restrictions as a result of COVID-19 may continue to have an impact on revenues. The Company does not believe that compliance with other current government regulations will have a material effect on the Company's capital expenditures, earnings or competitive position.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT'S VIEW OF THE BUSINESS

In analyzing business trends, management reviews results on a constant currency basis and considers a variety of performance and financial measures which are considered to be non-GAAP, including comparable sales growth, Systemwide sales growth, after-tax return on invested capital from continuing operations, free cash flow and free cash flow conversion rate, as described below. Management believes these measures are important in understanding the financial performance of the Company.

•Constant currency results exclude the effects of foreign currency translation and are calculated by translating current year results at prior year average exchange rates. Management reviews and analyzes business results excluding the effect of foreign currency translation, impairment and other strategic charges and gains, as well as material regulatory and other income tax impacts, and bases incentive compensation plans on these results because the Company believes this better represents underlying business trends.

•Comparable sales are compared to the same period in the prior year and represent sales at all restaurants, whether operated by the Company or by franchisees, in operation at least thirteen months including those temporarily closed. Some of the reasons restaurants may be temporarily closed include reimaging or remodeling, rebuilding, road construction and natural disasters (including restaurants temporarily closed due to COVID-19). Comparable sales exclude the impact of currency translation and the sales of any market considered hyper-inflationary (generally identified as those markets whose cumulative inflation rate over a three-year period exceeds 100%), which management believes more accurately reflects the underlying business trends. Comparable sales are driven by changes in guest counts and average check, the latter of which is affected by changes in pricing and product mix.

•Systemwide sales include sales at all restaurants, whether operated by the Company or by franchisees. This includes sales from digital channels, which are comprised of the mobile app, delivery and kiosk at both Company-operated and franchised restaurants. While franchised sales are not recorded as revenues by the Company, management believes the information is important in understanding the Company's financial performance because these sales are the basis on which the Company calculates and records franchised revenues and are indicative of the financial health of the franchisee base. The Company's revenues consist of sales by Company-operated restaurants and fees from franchised restaurants operated by conventional franchisees, developmental licensees and affiliates. Changes in Systemwide sales are primarily driven by comparable sales and net restaurant unit expansion.

•The Company’s after-tax return on invested capital ("ROIC") from continuing operations is a metric that management believes measures capital-allocation effectiveness over time. Other companies may calculate ROIC differently, limiting the usefulness of the measure for comparisons with other companies. Refer to the reconciliation in Exhibit 99.1 to this Form 10-K for further information on the Company's calculation of ROIC.

•Free cash flow, defined as cash provided by operations less capital expenditures, and free cash flow conversion rate, defined as free cash flow divided by net income, are measures reviewed by management in order to evaluate the Company’s ability to convert net profits into cash resources, after reinvesting in the core business, that can be used to pursue opportunities to enhance shareholder value. Refer to the reconciliations in Exhibit 99.1 to this Form 10-K for further information on the Company's calculations of free cash flow and free cash flow conversion rate.

2021 FINANCIAL PERFORMANCE

In 2021, global comparable sales increased 17.0%, primarily due to strong sales performance across all segments from continued execution of the Accelerating the Arches strategy, as well as recovery from the impact of COVID-19 in the prior year.

•Comparable sales in the U.S. increased 13.8%, benefiting primarily from strong average check growth, successful menu and marketing promotions and growth in digital channels, which benefited from the launch of the Company's loyalty program.

•Comparable sales in the International Operated segment increased 21.6%, reflecting positive comparable sales across all markets, primarily driven by the U.K. and France.

•Comparable sales in the International Developmental Licensed segment increased 16.6%, reflecting positive comparable sales across all geographic regions.

In addition to the comparable sales results, the Company had the following financial results in 2021:

•Consolidated revenues increased 21% (18% in constant currencies) to $23.2 billion.

•Systemwide sales increased 21% (18% in constant currencies) to $112.5 billion.

•Consolidated operating income increased 41% (38% in constant currencies) to $10.4 billion. Refer to the Operating Income section on page 17 of this Form 10-K for additional details.

•Operating margin, defined as operating income as a percent of total revenues, increased from 38.1% in 2020 to 44.6% in 2021. Excluding net strategic gains detailed in the Operating Income section on page 17 of this Form 10-K, operating margin increased from 36.7% in 2020 to 43.4% in 2021.

•Diluted earnings per share of $10.04 increased 59% (56% in constant currencies). Refer to the Net Income and Diluted Earnings Per Share section on page 12 of this Form 10-K for additional details.

McDonald's Corporation 2021 Annual Report 8

•Cash provided by operations was $9.1 billion, a 46% increase from the prior year.

•Capital expenditures of $2.0 billion were allocated mainly to reinvestment in existing restaurants and, to a lesser extent, to new restaurant openings.

•Free cash flow was $7.1 billion, a 54% increase from the prior year.

•Across the System, nearly 1,500 new restaurants (including those in developmental licensee and affiliate markets) were opened.

•The Company increased its quarterly cash dividend per share by 7% to $1.38 for the fourth quarter, equivalent to an annual dividend of $5.52 per share. The Company returned a total of $4.8 billion to shareholders through share repurchases and dividends in 2021.

STRATEGIC DIRECTION

In late 2020, the Company announced the Accelerating the Arches growth strategy (the “Strategy”). The Strategy, which encompasses all aspects of McDonald’s business as the leading global omni-channel restaurant brand, reflects a refreshed purpose, updated values and growth pillars that build on the Company’s competitive advantages. The Company's values, which underpin its success and are at the very heart of its Strategy, are discussed further in the Purpose, Mission and Values section on page 4 of this Form 10-K. In 2021, the Company made strides as it maximized the MCD growth pillars to create seamless, memorable customer experiences. Additionally, the creation of the Customer Experience Team brought together teams responsible for global marketing, digital, restaurant development and operations, enabling McDonald’s to create an unparalleled customer experience at each physical and digital customer touchpoint.

GROWTH PILLARS

The growth pillars, rooted in the Company’s identity, MCD, build on historic strengths and articulate areas of further opportunity. Under the Strategy, the Company will:

•Maximize our Marketing by investing in new, culturally relevant approaches, such as our Famous Orders platform, to effectively communicate the story of our brand, food and purpose. This also includes enhancing digital capabilities that provide a more personal connection with customers. The Company is committed to a marketing strategy that highlights value at every tier of the menu, as affordability remains a cornerstone of the McDonald’s brand.

•Commit to the Core by tapping into customer demand for the familiar and focusing on serving delicious burgers, chicken and coffee. The Company is prioritizing chicken and beef offerings, as we expect they represent the largest growth opportunities. The Company recognizes there is significant opportunity to expand its chicken offerings by leveraging line extensions of customer favorites, such as the new Crispy Chicken Sandwich that launched in the U.S. in 2021 and the McSpicy Chicken Sandwich, which is now in many markets around the world. The Company is also implementing a series of operational and formulation changes designed to improve upon the great taste of our burgers. We also see a significant opportunity with coffee, and markets are leveraging the McCafé brand, experience, value and quality to drive long-term growth.

•Double Down on the 3D's: Digital, Delivery and Drive Thru by leveraging competitive strengths and building a powerful digital experience growth engine to enhance the customer experience. To unlock further growth, the Company is continuing to accelerate technology innovation so that, however customers choose to interact with McDonald’s, they can enjoy a fast, easy experience that meets their needs. Notably, 2021 Systemwide sales from digital channels (which are comprised of the mobile app, delivery and kiosk) exceeded $18 billion, or over 25% of Systemwide sales in our top six markets.

◦Digital: The Company’s digital experience growth engine — “MyMcDonald’s” — is transforming its offerings across drive thru, takeaway, delivery, curbside pick-up and dine-in with digital enhancements. Through the digital tools, customers can access tailored offers, participate in a loyalty program, order through the mobile app and receive McDonald's food through the channel of their choice. The Company has successful loyalty programs in over 40 markets around the world, including “MyMcDonald’s Rewards” in the U.S., Germany and Canada, each of which launched in 2021. The Company expects to complete the roll-out of loyalty programs across its top six markets in the first half of 2022. Just six months after its launch, MyMcDonald’s Rewards in the U.S. has enrolled 30 million members, with over 21 million active loyalty members earning rewards.

◦Delivery: The Company has expanded the number of restaurants offering delivery to over 33,000, representing over 80% of McDonald's restaurants, and delivery sales have grown significantly over the past few years. The Company is continuing to build on this progress and enhance the delivery experience for customers by adding the ability to order on the McDonald’s app and optimizing operations with a focus on speed and accuracy. In 2021, the Company entered into long-term strategic partnerships with two of its largest global delivery providers, UberEats and DoorDash, which are expected to benefit both customers and franchisees.

◦Drive Thru: The Company has drive thru locations in over 25,000 restaurants globally, including nearly 95% of the 13,000+ locations in the U.S. This channel remains of heightened importance, and we expect that it will become even more critical to meet customers’ demand for flexibility and choice. The Company is building on its drive thru advantage, as the vast majority of new restaurant openings in the U.S. and International Operated Markets will include a drive thru.

McDonald's Corporation 2021 Annual Report 9

Foundational to the Accelerating the Arches Strategy is keeping the customer at the center of everything we do, along with a relentless focus on running great restaurants. The Company believes this Strategy builds on our inherent strengths by harnessing our competitive advantages while leveraging our size, scale and agility to adapt and adjust to operating conditions and consumer demands. These efforts, coupled with investment in innovation, are designed to enhance the customer experience and deliver long-term profitable growth, which is aligned with the Company’s capital allocation philosophy of investing in new restaurants and opportunities to grow the business, reinvesting in existing restaurants, and returning all free cash flow to shareholders over time through dividends and share repurchases.

OUTLOOK

Based on current conditions, the following information is provided to assist in forecasting the Company's results for 2022.

•The Company expects net restaurant unit expansion will contribute about 1.5% to 2022 Systemwide sales growth, in constant currencies.

•The Company expects full year 2022 selling, general & administrative expenses of between 2.2% and 2.3% of Systemwide sales.

•The Company expects operating margin percent to be in the low-to-mid 40% range.

•Based on current interest and foreign currency exchange rates, the Company expects interest expense for the full year 2022 to be relatively flat to 2021.

•Under current tax legislation, the Company expects the effective income tax rate for the full year 2022 to be in the 20% to 22% range. Some volatility may result in a quarterly tax rate outside of the annual range.

•The Company expects 2022 capital expenditures to be approximately $2.2 to $2.4 billion, about half of which will be directed towards new restaurant unit expansion across the U.S. and International Operated Markets. About 40% will be dedicated to the U.S. business, most of which will go towards reinvestment, including the completion of restaurant modernization efforts. Globally, the Company expects to open over 1,800 restaurants. The Company will open over 500 restaurants in the U.S. and International Operated Markets segments, and developmental licensees and affiliates will contribute capital towards over 1,300 restaurant openings in their respective markets. The Company expects over 1,400 net restaurant additions in 2022.

•The Company expects to achieve a free cash flow conversion rate greater than 90%.

McDonald's Corporation 2021 Annual Report 10

CONSOLIDATED OPERATING RESULTS

The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes beginning on page 38 of this Form 10-K. This section generally discusses 2021 and 2020 items and the year-to-year comparisons between the years ended December 31, 2021 and 2020. Discussions of 2019 items and the year-to-year comparisons between the years ended December 31, 2020 and 2019 are not included in this Form 10-K and can be found in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 23, 2021.

Impact of COVID-19 Restrictions on the Business

As a result of COVID-19, throughout 2020 and 2021, markets experienced varying levels of government restrictions on restaurant operating hours, limited dine-in capacity, dining room closures and, primarily in 2020, some instances of full restaurant closures. The Company has applied appropriate precautionary measures, including following the guidance of expert health authorities, and will continue to adapt and enhance its approach in order to protect the safety and well-being of its customers and people. As most revenues and the Company's share of net results in equity investments are based on sales results, consumer sentiment and government restrictions as a result of COVID-19 may continue to have an impact on results.

Operating results
			2021				2020		2019
Dollars and shares in millions, except per share data	Amount		Increase/ (decrease)		Amount		Increase/ (decrease)		Amount
Revenues
Sales by Company-operated restaurants	$	9,787	20	%	$	8,139	(14	%)	$	9,421
Revenues from franchised restaurants	13,085		22		10,726		(8)		11,656
Other revenues	351		2		343		19		288
Total revenues	23,223		21		19,208		(10)		21,365
Operating costs and expenses
Company-operated restaurant expenses	8,047		15		6,981		(10)		7,761
Franchised restaurants-occupancy expenses	2,335		6		2,208		—		2,201
Other restaurant expenses	260		(2)		267		19		224
Selling, general & administrative expenses
Depreciation and amortization	330		10		301		14		262
Other	2,378		6		2,245		14		1,967
Other operating (income) expense, net	(483)		n/m		(118)		2		(120)
Total operating costs and expenses	12,867		8		11,884		(3)		12,295
Operating income	10,356		41		7,324		(19)		9,070
Interest expense	1,186		(3)		1,218		9		1,122
Nonoperating (income) expense, net	42		n/m		(35)		50		(70)
Income before provision for income taxes	9,128		49		6,141		(23)		8,018
Provision for income taxes	1,583		12		1,410		(29)		1,993
Net income	$	7,545	59	%	$	4,731	(21	%)	$	6,025
Earnings per common share—diluted	$	10.04	59	%	$	6.31	(20	%)	$	7.88
Weighted-average common shares outstanding— diluted	751.8		—	%	750.1		(2	%)	764.9

n/m Not meaningful

McDonald's Corporation 2021 Annual Report 11

IMPACT OF FOREIGN CURRENCY TRANSLATION ON REPORTED RESULTS

While changes in foreign currency exchange rates affect reported results, McDonald’s mitigates exposures, where practical, by purchasing goods and services in local currencies, financing in local currencies and hedging certain foreign-denominated cash flows.

Impact of foreign currency translation on reported results

			Reported amount						Currency translation benefit/(cost)
In millions, except per share data	2021		2020		2019		2021		2020		2019
Revenues	$	23,223	$	19,208	$	21,365	$	488	$	(75)	$	(610)
Company-operated margins	1,740		1,158		1,660		42		(1)		(51)
Franchised margins	10,750		8,519		9,455		223		32		(256)
Selling, general & administrative expenses	2,708		2,546		2,229		(28)		(2)		29
Operating income	10,356		7,324		9,070		231		35		(280)
Net income	7,545		4,731		6,025		150		26		(165)
Earnings per common share—diluted	10.04		6.31		7.88		0.20		0.04		(0.21)

In 2021, results primarily reflected the strengthening of the British Pound, Euro, Australian Dollar and Canadian Dollar.

NET INCOME AND DILUTED EARNINGS PER COMMON SHARE

In 2021, net income increased 59% (56% in constant currencies) to $7.5 billion and diluted earnings per common share increased 59% (56% in constant currencies) to $10.04. Foreign currency translation had a positive impact of $0.20 on diluted earnings per share.

Results in 2021 reflected stronger operating performance across all segments due to higher sales-driven restaurant margins as the Company continues to execute on its Accelerating the Arches Strategy. Results also benefited from fewer restaurant closures and reduced COVID-related government restrictions compared with the prior year.

Outlined below is additional information for the full year 2021, 2020 and 2019:

Diluted Earnings Per Common Share Reconciliation
	Amount						Increase/(decrease)				Increase/(decrease) excluding currency translation
	2021		2020		2019		2021		2020		2021		2020
GAAP earnings per share-diluted	$	10.04	$	6.31	$	7.88	59	%	(20	%)	56	%	(20	%)
Strategic (gains) charges	(0.28)		(0.26)		0.07
Income tax (benefit) cost, net	(0.48)		—		(0.11)
Non-GAAP earnings per share-diluted	$	9.28	$	6.05	$	7.84	53	%	(23	%)	50	%	(23	%)

2021 results included:

◦net pre-tax strategic gains of $339 million, or $0.33 per share, primarily related to the sale of McDonald's Japan stock. This reduced the Company's ownership to 35% and completed the planned partial divestiture of the Company's ownership in McDonald's Japan

◦$54 million, or $0.05 per share, of strategic charges primarily related to the sale of McD Tech Labs

◦$364 million, or $0.48 per share, of income tax benefits which related to the remeasurement of deferred taxes as a result of a change in the U.K. statutory income tax rate

2020 results included:

◦net pre-tax strategic gains of $268 million, or $0.26 per share, primarily related to the sale of McDonald's Japan stock

2019 results included:

◦$84 million, or $0.11 per share, of income tax benefit due to regulations issued in the fourth quarter 2019 related to the Tax Cuts and Jobs Act of 2017 (“Tax Act”)

◦net pre-tax strategic charges of $74 million, or $0.07 per share, primarily related to impairment associated with the purchase of the Company's joint venture partner's interest in the India Delhi market, partly offset by gains on the sales of property at the former Corporate headquarters

Excluding the above 2021 and 2020 items, 2021 net income increased 54% (50% in constant currencies), and diluted earnings per share increased 53% (50% in constant currencies).

The Company repurchased 3.4 million shares of its stock for $846 million in 2021 and 4.3 million shares of its stock for $874 million in 2020.

McDonald's Corporation 2021 Annual Report 12

REVENUES

The Company's revenues consist of sales by Company-operated restaurants and fees from restaurants operated by franchisees, developmental licensees and affiliates. Revenues from conventional franchised restaurants include rent and royalties based on a percent of sales with minimum rent payments, and initial fees. Revenues from restaurants licensed to developmental licensees and affiliates include a royalty based on a percent of sales, and generally include initial fees. The Company’s Other revenues are comprised of fees paid by franchisees to recover a portion of costs incurred by the Company for various technology platforms, revenues from brand licensing arrangements to market and sell consumer packaged goods using the McDonald’s brand and third party revenues for the Dynamic Yield business.

Franchised restaurants represented 93% of McDonald's restaurants worldwide at December 31, 2021. The Company's heavily franchised business model is designed to generate stable and predictable revenue, which is largely a function of franchisee sales and resulting cash flow streams.

Revenues
	Amount						Increase/(decrease)				Increase/(decrease) excluding currency translation
Dollars in millions	2021		2020		2019		2021		2020		2021		2020
Company-operated sales:
U.S.	$	2,617	$	2,395	$	2,490	9	%	(4	%)	9	%	(4	%)
International Operated Markets	6,456		5,114		6,334		26		(19)		23		(18)
International Developmental Licensed Markets & Corporate	715		630		597		13		6		10		7
Total	$	9,788	$	8,139	$	9,421	20	%	(14	%)	18	%	(12	%)
Franchised revenues:
U.S.	$	6,094	$	5,261	$	5,353	16	%	(2	%)	16	%	(2	%)
International Operated Markets	5,638		4,348		5,064		30		(14)		24		(15)
International Developmental Licensed Markets & Corporate	1,353		1,117		1,239		21		(10)		20		(8)
Total	$	13,085	$	10,726	$	11,656	22	%	(8	%)	19	%	(8	%)
Total Company-operated sales and Franchised revenues:
U.S.	$	8,711	$	7,656	$	7,843	14	%	(2	%)	14	%	(2	%)
International Operated Markets	12,094		9,462		11,398		28		(17)		23		(17)
International Developmental Licensed Markets & Corporate	2,068		1,747		1,836		18		(5)		16		(3)
Total	$	22,873	$	18,865	$	21,077	21	%	(10	%)	19	%	(10	%)
Total Other revenues	$	350	$	343	$	288	2	%	19	%	—	%	19	%
Total Revenues	$	23,223	$	19,208	$	21,365	21	%	(10	%)	18	%	(10	%)

In 2021, total Company-operated sales and franchised revenues increased 21% (19% in constant currencies). Results reflected strong sales performance across all segments and were driven by the U.K., France and Russia in the International Operated Markets segment. The International Developmental Licensed Markets segment reflected strong sales performance across all geographic regions.

TOTAL REVENUES BY SEGMENT

U.S.

International Operated Markets

International Developmental Licensed Markets & Corporate

McDonald's Corporation 2021 Annual Report 13

The following tables present comparable sales and Systemwide sales increases/(decreases):

Comparable sales increases/(decreases)
	2021		2020		2019
U.S.	13.8	%	0.4	%	5.0	%
International Operated Markets	21.6		(15.0)		6.1
International Developmental Licensed Markets & Corporate	16.6		(10.5)		7.2
Total	17.0	%	(7.7	%)	5.9	%

Due to the impact of COVID-19 in 2020, comparable sales growth from 2020 to 2021 may not be fully indicative of the Company's performance. Therefore in 2021, management also analyzed comparable sales growth on a two-year basis as a metric to compare results for 2021 against more normalized sales performance in 2019. The following chart presents comparable sales growth on a two-year basis by segment:

COMPARABLE SALES GROWTH ON A TWO-YEAR BASIS

Systemwide sales increases/(decreases)*
					Increase/(decrease) excluding currency translation
	2021		2020		2021		2020
U.S.	13	%	—	%	13	%	—	%
International Operated Markets	29		(13)		24		(14)
International Developmental Licensed Markets & Corporate	21		(10)		20		(8)
Total	21	%	(7	%)	18	%	(7	%)

    * Unlike comparable sales, the Company has not excluded sales from hyperinflationary markets from Systemwide sales as these sales are the basis on which the Company calculates and records revenues.

Franchised sales are not recorded as revenues by the Company, but are the basis on which the Company calculates and records franchised revenues and are indicative of the financial health of the franchisee base. The following table presents franchised sales and the related increases/(decreases):

Franchised sales

	Amount						Increase/(decrease)				Increase/(decrease) excluding currency translation
Dollars in millions	2021		2020		2019		2021		2020		2021		2020
U.S.	$	43,344	$	38,123	$	37,923	14	%	1	%	14	%	1	%
International Operated Markets	33,097		25,446		28,853		30		(12)		24		(13)
International Developmental Licensed Markets & Corporate	26,234		21,609		23,981		21		(10)		21		(8)
Total	$	102,675	$	85,178	$	90,757	21	%	(6	%)	18	%	(6	%)
Ownership type
Conventional franchised	$	75,956	$	63,297	$	66,415	20		(5	%)	18	%	(5	%)
Developmental licensed	15,151		11,781		14,392		29		(18)		28		(14)
Foreign affiliated	11,568		10,100		9,950		15		2		13		—
Total	$	102,675	$	85,178	$	90,757	21	%	(6	%)	18	%	(6	%)

McDonald's Corporation 2021 Annual Report 14

RESTAURANT MARGINS

Franchised restaurant margins are measured as revenues from franchised restaurants less franchised restaurant occupancy costs. Franchised revenues include rent and royalties based on a percent of sales, and initial fees. Franchised restaurant occupancy costs include lease expense and depreciation, as the Company generally owns or secures a long-term lease on the land and building for the restaurant location.

Company-operated restaurant margins are measured as sales from Company-operated restaurants less costs for food & paper, payroll & employee benefits and occupancy & other operating expenses necessary to run an individual restaurant. Company-operated margins exclude costs that are not allocated to individual restaurants, primarily payroll & employee benefit costs of non-restaurant support staff, which are included in selling, general and administrative expenses.

Restaurant margins

	Amount						Increase/(decrease)				Increase/(decrease) excluding currency translation
Dollars in millions	2021		2020		2019		2021		2020		2021		2020
Franchised:
U.S.	$	4,906	$	4,097	$	4,227	20	%	(3	%)	20	%	(3	%)
International Operated Markets	4,516		3,329		4,018		36		(17)		29		(19)
International Developmental Licensed Markets & Corporate	1,328		1,093		1,210		22		(10)		20		(8)
Total	$	10,750	$	8,519	$	9,455	26	%	(10	%)	24	%	(10	%)
Company-operated:
U.S.	$	511	$	405	$	388	26	%	4	%	26	%	4	%
International Operated Markets	1,208		748		1,266		61		(41)		56		(41)
International Developmental Licensed Markets & Corporate	n/m		n/m		n/m		n/m		n/m		n/m		n/m
Total	$	1,740	$	1,158	$	1,660	50	%	(30	%)	47	%	(30	%)
Total restaurant margins:
U.S.	$	5,417	$	4,502	$	4,615	20	%	(2	%)	20	%	(2	%)
International Operated Markets	5,724		4,077		5,284		40		(23)		34		(24)
International Developmental Licensed Markets & Corporate	n/m		n/m		n/m		n/m		n/m		n/m		n/m
Total	$	12,490	$	9,677	$	11,115	29	%	(13	%)	26	%	(13	%)

n/m Not meaningful

In 2021, total restaurant margins increased 29% (26% in constant currencies), which reflected strong sales performance across all segments.

Franchised margins represented over 85% of restaurant margin dollars.

Franchised margins in the U.S. reflected higher depreciation costs related to investments in restaurant modernization while benefiting from the comparison to prior year support for marketing provided to franchisees to accelerate recovery and drive growth.

Total restaurant margins included $1,533 million of depreciation and amortization expenses in 2021.

RESTAURANT MARGINS BY TYPE (In millions)

McDonald's Corporation 2021 Annual Report 15

SELLING, GENERAL & ADMINISTRATIVE EXPENSES

Selling, general & administrative expenses

	Amount						Increase/(decrease)				Increase/(decrease) excluding currency translation
Dollars in millions	2021		2020		2019		2021		2020		2021		2020
U.S.	$	696	$	625	$	587	11	%	7	%	11	%	7	%
International Operated Markets	692		700		629		(1)		11		(5)		11
International Developmental Licensed Markets & Corporate(1)	1,320		1,221		1,013		8		20		8		20
Total Selling, General & Administrative Expenses	$	2,708	$	2,546	$	2,229	6	%	14	%	5	%	14	%
Less: Incentive-Based Compensation(2)	439		158		289		n/m		(45	%)	n/m		(45	%)
Total Excluding Incentive-Based Compensation	$	2,269	$	2,388	$	1,940	(5	%)	23	%	(6	%)	23	%

(1)Includes home office support costs in areas such as facilities, finance, human resources, investments in strategic technology initiatives, legal, marketing, restaurant operations, supply chain and training.

(2)Includes all cash incentives and share-based compensation expense.

In 2021, consolidated selling, general & administrative expenses increased 6% (5% in constant currencies), reflecting an increase in incentive-based compensation expense driven by stronger than planned operating results and higher costs for investments in restaurant technology. These results also benefited from the comparison to the Company's five-year, $100 million commitment to RMHC, increased investments in brand communications and incremental marketing contributions in 2020.

Management believes that analyzing selling, general & administrative expenses as a percent of Systemwide sales is meaningful because these costs are incurred to support the overall McDonald's business.

SELLING, GENERAL & ADMINISTRATIVE EXPENSES AS A PERCENT OF SYSTEMWIDE SALES

OTHER OPERATING (INCOME) EXPENSE, NET

Other operating (income) expense, net

In millions	2021		2020		2019
Gains on sales of restaurant businesses	$	(96)	$	(23)	$	(127)
Equity in earnings of unconsolidated affiliates	(177)		(117)		(154)
Asset dispositions and other (income) expense, net	75		290		87
Impairment and other charges (gains), net	(285)		(268)		74
Total	$	(483)	$	(118)	$	(120)

McDonald's Corporation 2021 Annual Report 16

•Gains on sales of restaurant businesses

In 2021, gains on sales of restaurant businesses increased due to a higher number of restaurant sales, primarily in the U.S., the U.K. and Germany.

•Equity in earnings of unconsolidated affiliates

In 2021, equity in earnings of unconsolidated affiliates increased due to the recovery from the impact of COVID-19, offset by lower equity in earnings as a result of the reduced ownership in McDonald's Japan.

•Asset dispositions and other (income) expense, net

Asset dispositions and other (income) expense, net reflected lower bad debt expense and lower restaurant closing costs compared to the prior year, as well as higher gains on strategic property sales and the comparison to prior year payments to distribution centers for obsolete inventory to support franchisee liquidity.

•Impairment and other charges (gains), net

In 2021, impairment and other charges (gains), net reflected $339 million of pre-tax strategic gains related to the sale of McDonald's Japan stock. These results were partly offset by $54 million of strategic charges primarily related to the sale of McD Tech Labs.

The results in 2020 reflected $274 million of pre-tax strategic gains related to the sale of McDonald's Japan stock. Results for the year 2020 also reflected the write-off of impaired software of $26 million, partly offset by $13 million of income associated with the Company's sale of its business in the India Delhi market.

The results in 2019 reflected $99 million of impairment associated with the purchase of the Company's joint venture partner's interest in the India Delhi market, partly offset by $20 million of gains on the sales of property at the former Corporate headquarters.

OPERATING INCOME

Operating income

	Amount									Increase/(decrease)				Increase/(decrease) excluding currency translation
Dollars in millions	2021			2020			2019			2021		2020		2021		2020
U.S.	$	4,755		$	3,789		$	4,069		25	%	(7	%)	25	%	(7	%)
International Operated Markets	5,130			3,315			4,789			55		(31)		48		(32)
International Developmental Licensed Markets & Corporate	471			220			212			n/m		4		n/m		12
Total	$	10,356		$	7,324		$	9,070		41	%	(19	%)	38	%	(20	%)
Operating margin	44.6		%	38.1		%	42.5		%
Non-GAAP operating margin	43.4		%	36.7		%	42.8		%

•Operating Income: Operating income increased 41% (38% in constant currencies). Results for the year 2021 reflected $339 million of net strategic gains, primarily related to the sale of McDonald's Japan stock, partly offset by $54 million of strategic charges primarily related to the sale of McD Tech Labs. Results for 2020 included $268 million of net strategic gains, primarily related to the sale of McDonald's Japan stock. Excluding these current year and prior year items, operating income increased 43% (39% in constant currencies) for 2021.

•U.S.: The operating income increase was driven by strong sales performance, higher gains on sales of restaurants and the comparison to approximately $100 million of incremental marketing support in the prior year.

•International Operated Markets: The operating income increase was driven by strong sales performance, primarily in the U.K. and France, as well as lower store closing costs and bad debt expense. Results also reflected the comparison to over $100 million of incremental marketing support in the prior year.

•International Developmental Licensed Markets & Corporate: Excluding strategic gains and charges, results reflected strong sales performance across most of the segment and higher Corporate general and administrative expenses due to increased incentive-based compensation expense in the current year. Results also reflected the comparison to the Company's five-year commitment to RMHC and higher investments in brand communications in the prior year.

McDonald's Corporation 2021 Annual Report 17

OPERATING INCOME BY SEGMENT*

U.S.

International Operated Markets

International Developmental Licensed Markets & Corporate*

*The IDL segment data in this graphic excludes Corporate activities, which is a Non-GAAP presentation.

•Operating margin: Operating margin is defined as operating income as a percent of total revenues. The contributions to operating margin differ by segment due to each segment's ownership structure, primarily due to the relative percentage of franchised versus Company-operated restaurants. Additionally, temporary restaurant closures, which vary by segment, impact the contribution of each segment to the consolidated operating margin.

Excluding the net strategic gains, the increase in operating margin percent for 2021 was due to strong sales-driven restaurant margin growth and higher other operating income, partly offset by higher incentive-based compensation expense.

NON-GAAP OPERATING MARGIN PERCENT ROLL-FORWARD*

Non-GAAP operating margin Increase Decrease

*The operating margin roll-forward excludes the strategic gains and charges previously described.

McDonald's Corporation 2021 Annual Report 18

INTEREST EXPENSE

Interest expense decreased 3% (4% in constant currencies) and increased 9% (8% in constant currencies) in 2021 and 2020, respectively. Results in 2021 reflected lower average debt balances.

NONOPERATING (INCOME) EXPENSE, NET

Nonoperating (income) expense, net

In millions	2021			2020			2019
Interest income		$	(9)		$	(18)		$	(37)
Foreign currency and hedging activity		37			(3)			(48)
Other expense		14			(14)			15
Total		$	42		$	(35)		$	(70)

Foreign currency and hedging activity includes net gains or losses on certain hedges that reduce the exposure to variability on certain intercompany foreign currency cash flow streams.

PROVISION FOR INCOME TAXES

In 2021, 2020 and 2019 the reported effective income tax rates were 17.3%, 23.0% and 24.9%, respectively.

Results for 2021 included $364 million of income tax benefits due to a change in the U.K. statutory income tax rate. Excluding the income tax benefits and the tax impact of net strategic gains, the effective income tax rate for the year was 21.1%.

The effective income tax rate for 2020 included $50 million of income tax benefits due to new U.S. tax regulations and $48 million of income tax benefits related to the impact of a tax rate change in the U.K.

The effective income tax rate for 2019 reflected $84 million of income tax benefit due to regulations issued in the fourth quarter 2019 related to the Tax Act. Excluding the income tax benefit, the effective income tax rate was 25.9% for the year 2019.

Consolidated deferred tax assets, net of valuation allowance, was $6.6 billion in 2021 and $6.5 billion in 2020. Substantially all of the net tax assets are expected to be realized in the U.S. and other profitable markets.

RECENTLY ISSUED ACCOUNTING STANDARDS

Recently issued accounting standards are included on page 43 of this Form 10-K.

CASH FLOWS

The Company has a long history of generating significant cash from operations and has substantial credit capacity to fund operating and discretionary spending such as capital expenditures, debt repayments, dividends and share repurchases.

Cash provided by operations totaled $9.1 billion in 2021, an increase of $2.9 billion or 46%. Free cash flow was $7.1 billion in 2021, an increase of $2.5 billion or 54%. The Company’s free cash flow conversion rate was 94% in 2021 and 98% in 2020. Cash provided by operations increased in 2021 compared to 2020 due to improved operating results and changes in working capital, partly offset by higher income tax payments.

Cash used for investing activities totaled $2.2 billion in 2021, an increase of $620 million compared with 2020. The increase was primarily due to higher capital expenditures and purchases of restaurant businesses, partly offset by higher sales of restaurant businesses and property.

Cash used for financing activities totaled $5.6 billion in 2021, an increase of $3.3 billion compared with 2020. The increase was primarily due to $1.1 billion in net debt repayments in 2021 compared with $2.2 billion in net debt issuances in 2020.

The Company’s cash and equivalents balance was $4.7 billion and $3.4 billion at year end 2021 and 2020, respectively. In addition to cash and equivalents on hand and cash provided by operations, the Company can meet short-term funding needs through its continued access to commercial paper borrowings and line of credit agreements.

McDonald's Corporation 2021 Annual Report 19

RESTAURANT DEVELOPMENT AND CAPITAL EXPENDITURES

In 2021, the Company opened 1,494 restaurants and closed 661 restaurants. In 2020, the Company opened 977 restaurants and closed 643 restaurants. The increase in openings in 2021 was primarily due to recovery from the impact of COVID-19 in the prior year.

Systemwide restaurants at year end

	2021	2020	2019
U.S.	13,438	13,682	13,846
International Operated Markets	10,785	10,560	10,465
International Developmental Licensed Markets & Corporate	15,808	14,956	14,384
Total	40,031	39,198	38,695

RESTAURANTS BY OWNERSHIP TYPE

Franchised restaurants Company-operated restaurants

Approximately 93% of the restaurants at year-end 2021 were franchised, including 95% in the U.S., 84% in International Operated Markets and 98% in the International Developmental Licensed Markets.

Capital expenditures increased $399 million or 24% in 2021 due to higher reinvestment in existing restaurants and an increase in new restaurant openings that required the Company's capital. Capital expenditures decreased $753 million or 31% in 2020 primarily due to lower reinvestment in existing restaurants as a result of COVID-19.

McDonald's Corporation 2021 Annual Report 20

CAPITAL EXPENDITURES BY TYPE (In millions)

* Primarily corporate equipment and other office-related expenditures.

New restaurant investments in all years were concentrated in markets with strong returns and/or opportunities for long-term growth. Average development costs vary widely by market depending on the types of restaurants built and the real estate and construction costs within each market. These costs, which include land, buildings and equipment, are managed through the use of optimally-sized restaurants, construction and design efficiencies, as well as leveraging the Company's global sourcing network and best practices. Although the Company is not responsible for all costs for every restaurant opened, total development costs for new traditional McDonald’s restaurants in the U.S. averaged approximately $4.4 million in 2021.

As of December 31, 2021 and 2020, the Company owned approximately 55% of the land and 80% of the buildings for restaurants in its consolidated markets.

SHARE REPURCHASES AND DIVIDENDS

In 2021, the Company returned approximately $4.8 billion to shareholders, primarily through dividends paid.

Shares repurchased and dividends  

In millions, except per share data	2021		2020		2019
Number of shares repurchased	3.4		4.3		25.0
Shares outstanding at year end	745		745		746
Dividends declared per share	$	5.25	$	5.04	$	4.73
Treasury stock purchases (in Shareholders' equity)	$	846	$	874	$	4,980
Dividends paid	3,919		3,753		3,582
Total returned to shareholders	$	4,765	$	4,627	$	8,562

In December 2019, the Company's Board of Directors approved a share repurchase program, effective January 1, 2020, that authorized the purchase of up to $15 billion of the Company's outstanding stock, with no specified expiration date. In 2021, approximately 3.4 million shares were repurchased for $845.5 million, bringing total purchases under the program to approximately 7.7 million shares or $1.7 billion.

The Company has paid dividends on its common stock for 46 consecutive years and has increased the dividend amount every year. The 2021 full year dividend of $5.25 per share reflects the quarterly dividend paid for each of the first three quarters of $1.29 per share, with an increase to $1.38 per share paid in the fourth quarter. This 7% increase in the quarterly dividend equates to a $5.52 per share annual dividend and reflects the Company’s confidence in the ongoing strength and reliability of its cash flow. As in the past, future dividend amounts will be considered after reviewing profitability expectations and financing needs, and will be declared at the discretion of the Company’s Board of Directors.

McDonald's Corporation 2021 Annual Report 21

FINANCIAL POSITION AND CAPITAL RESOURCES

TOTAL ASSETS AND RETURN

Total assets increased $1.2 billion or 2% in 2021, primarily due to an increase in Cash and equivalents driven by improved operating results. Net property and equipment decreased $0.2 billion in 2021, primarily due to depreciation and the impact of foreign exchange rates. Net property and equipment and the Lease right-of-use asset, net represented approximately 46% and approximately 25%, respectively, of total assets at year-end. Approximately 84% of total assets were in the U.S. and International Operated Markets at year-end 2021.

The Company’s after-tax ROIC from continuing operations is a metric that management believes measures capital-allocation effectiveness over time and was 21.5%, 14.9% and 19.2% as of December 31, 2021, 2020 and 2019, respectively. The increase from 2020 to 2021 was primarily due to improved operating results and recovery from the impact of COVID-19 as well as lower average debt balances compared to the prior year. Refer to the reconciliation in Exhibit 99.1 to this Form 10-K.

FINANCING AND MARKET RISK

The Company generally borrows on a long-term basis and is exposed to the impact of interest rate changes and foreign currency fluctuations. Debt obligations at December 31, 2021 totaled $35.6 billion, compared with $37.4 billion at December 31, 2020. The net decrease in 2021 was due to net repayments of $1.1 billion and the impact of changes in exchange rates on foreign currency denominated debt of $731 million.

Debt highlights(1)

	2021		2020		2019
Fixed-rate debt as a percent of total debt(2,3)	95	%	95	%	92	%
Weighted-average annual interest rate of total debt(3)	3.2		3.2		3.2
Foreign currency-denominated debt as a percent of total debt(2)	36		36		38
Total debt as a percent of total capitalization (total debt and total Shareholders' equity)(2)	115		126		131
Cash provided by operations as a percent of total debt(2)	26		17		24

(1)All percentages are as of December 31, except for the weighted-average annual interest rate, which is for the year. See reconciliation in Exhibit 99.1.

(2)Based on debt obligations before the effects of fair value hedging adjustments and deferred debt costs. These effects are excluded as they have no impact on the obligation at maturity. See the Debt Financing footnote on page 57 of this Form 10-K.

(3)Includes the effect of interest rate swaps used to hedge debt.

Standard & Poor's and Moody's currently rate the Company’s commercial paper A-2 and P-2, respectively, and its long-term debt BBB+ and Baa1, respectively. To access the debt capital markets, the Company relies on credit-rating agencies to assign short-term and long-term credit ratings.

Certain of the Company’s debt obligations contain cross-acceleration provisions and restrictions on Company and subsidiary mortgages and the long-term debt of certain subsidiaries. There are no provisions in the Company’s debt obligations that would accelerate repayment of debt as a result of a change in credit ratings or a material adverse change in the Company’s business. In December 2019, the Company's Board of Directors authorized $15 billion of borrowing capacity with no specified expiration date, of which $8.3 billion remains outstanding as of December 31, 2021. These borrowings may include (i) public or private offering of debt securities; (ii) direct borrowing from banks or other financial institutions; and (iii) other forms of indebtedness. In April 2020, the Company’s Board of Directors provided additional authorization to issue commercial paper and draw on lines of credit agreements up to $8 billion in addition to the $15 billion authorized as referenced above. In addition to debt securities available through a medium-term notes program registered with the SEC and a Global Medium-Term Notes program, the Company has $4.5 billion available under committed line of credit agreements (see the Debt Financing footnote on page 57 of this Form 10-K). As of December 31, 2021, the Company's subsidiaries also had $263 million of borrowings outstanding, primarily under uncommitted foreign currency line of credit agreements.

The Company uses major capital markets, bank financings and derivatives to meet its financing requirements. The Company manages its debt portfolio in response to changes in interest rates and foreign currency rates by periodically retiring, redeeming and repurchasing debt, terminating swaps and using derivatives. The Company does not hold or issue derivatives for trading purposes. All swaps are over-the-counter instruments.

In managing the impact of interest rate changes and foreign currency fluctuations, the Company uses interest rate swaps and finances in the currencies in which assets are denominated. The Company uses foreign currency debt and derivatives to hedge the foreign currency risk associated with certain royalties, intercompany financings and long-term investments in foreign subsidiaries and affiliates. This reduces the impact of fluctuating foreign currencies on cash flows and shareholders’ equity. Total foreign currency-denominated debt was $12.8 billion and $13.7 billion for the years ended December 31, 2021 and 2020, respectively. In addition, where practical, the Company’s restaurants purchase goods and services in local currencies resulting in natural hedges. See the Summary of significant accounting policies footnote related to financial instruments and hedging activities on page 47 of this Form 10-K for additional information regarding the accounting impact and use of derivatives.

The Company does not have significant exposure to any individual counterparty and has master agreements that contain netting arrangements. Certain of these agreements also require each party to post collateral if credit ratings fall below, or aggregate exposures exceed, certain contractual limits. At December 31, 2021, neither the Company nor its counterparties were required to post collateral on any derivative position, other than on hedges of certain of the Company’s supplemental benefit plan liabilities where the counterparties were required to post collateral on their liability positions.

McDonald's Corporation 2021 Annual Report 22

The Company’s net asset exposure is diversified among a broad basket of currencies. The Company’s largest net asset exposures (defined as foreign currency assets less foreign currency liabilities) at year end were as follows:

Foreign currency net asset exposures

In millions of U.S. Dollars	2021		2020
British Pounds Sterling	$	1,293	$	1,374
Canadian Dollars	904		878
Australian Dollars	855		913
Russian Ruble	518		533
Polish Zloty	427		393

The Company prepared sensitivity analyses of its financial instruments to determine the impact of hypothetical changes in interest rates and foreign currency exchange rates on the Company’s results of operations, cash flows and the fair value of its financial instruments. The interest rate analysis assumed a one percentage point adverse change in interest rates on all financial instruments, but did not consider the effects of the reduced level of economic activity that could exist in such an environment. The foreign currency rate analysis assumed that each foreign currency rate would change by 10% in the same direction relative to the U.S. Dollar on all financial instruments; however, the analysis did not include the potential impact on revenues, local currency prices or the effect of fluctuating currencies on the Company’s anticipated foreign currency royalties and other payments received from the markets. Based on the results of these analyses of the Company’s financial instruments, neither a one percentage point adverse change in interest rates from 2021 levels nor a 10% adverse change in foreign currency rates from 2021 levels would materially affect the Company’s results of operations, cash flows or the fair value of its financial instruments.

LIQUIDITY AND USES OF CASH

The Company generates significant cash from operations and expects available cash and cash equivalents, future operating cash flows and its ability to issue debt to be sufficient to finance its foreseeable operating needs and other cash requirements.

Consistent with prior years, the Company expects existing domestic cash and equivalents, domestic cash flows from operations, the ability to issue domestic debt and repatriation of a portion of foreign earnings to continue to be sufficient to fund its domestic operating, investing and financing activities. The Company also continues to expect existing foreign cash and equivalents and foreign cash flows from operations to be sufficient to fund its foreign operating, investing and financing activities. In the future, should more capital be required to fund activities in the U.S. than is generated by domestic operations and is available through the issuance of domestic debt, the Company could elect to repatriate a greater portion of future periods' earnings from foreign jurisdictions.

The Company has significant operations outside the U.S. where it earns approximately 65% of its operating income. A significant portion of these historical earnings have been reinvested in foreign jurisdictions where the Company has made, and will continue to make, substantial investments to support the ongoing development and growth of its international operations.

Sources of Liquidity

The Company has long-term revenue and cash flow streams that relate to its franchise arrangements. Minimum rent payments under franchise arrangements are based on the Company’s underlying investment in owned sites and parallel the Company’s underlying lease obligations and escalations on properties that are leased. The Company believes that control over the real estate enables it to achieve restaurant performance levels that are among the highest in the industry. Refer to the Franchise Arrangements footnote on page 51 of this Form 10-K for additional information on future gross minimum payments due to the Company under existing conventional franchise arrangements.

Additionally, the Company is authorized to utilize up to $15 billion of borrowing capacity in various forms by the Board of Directors, of which $8.3 billion remains outstanding as of December 31, 2021, as well as the ability to issue commercial paper and draw on lines of credit agreements up to $8 billion. Refer to the Financing and Market Risk section on page 22 of this Form 10-K.

Material Cash Requirements and Uses of Cash

Material cash requirements primarily consist of lease obligations (related to both Company-operated and franchised restaurants) and debt obligations. Refer to the Leasing Arrangements footnote on page 52 and the Debt Financing footnote on page 57 of this Form 10-K for more information.

The Company also records liabilities related to supplemental benefit plans maintained in the U.S. as well as liabilities for gross unrecognized tax benefits on certain tax positions. Details related to these obligations are provided in the Employee Benefit Plan footnote on page 56 and the Income Taxes footnote on page 54 of this Form 10-K.

The Company contracts with vendors and suppliers in the normal course of business. These contracts may include items related to construction projects, inventory, energy, marketing, technology and other services. Generally, these items are shorter term in nature and have no minimum payment requirements. These expenses, along with other standard operating expenses incurred, are funded from operating cash flows and reflected in other areas of this Form 10-K (e.g., franchised margins, Company-operated margins and selling, general & administrative expenses that are reflected in the Consolidated Statement of Income and capital expenditures that are reflected on the Consolidated Statement of Cash Flows).

Additionally, the Company has guaranteed certain loans totaling approximately $110 million at December 31, 2021. These guarantees are contingent commitments generally issued by the Company to support borrowing arrangements of the System. At December 31, 2021, there was no carrying value for obligations under these guarantees in the Consolidated Balance Sheet.

McDonald's Corporation 2021 Annual Report 23

OTHER MATTERS

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses as well as related disclosures. On an ongoing basis, the Company evaluates its estimates and judgments based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

The Company reviews its financial reporting and disclosure practices and accounting policies quarterly to confirm that they provide accurate and transparent information relative to the current economic and business environment. The Company believes that of its significant accounting policies, the following involve a higher degree of judgment and/or complexity:

•Property and equipment

Property and equipment are depreciated or amortized on a straight-line basis over their useful lives based on management’s estimates of the period over which the assets will generate revenue (not to exceed lease term plus options for leased property). The useful lives are estimated based on historical experience with similar assets, taking into account anticipated technological or other changes. Refer to the Property and Equipment section in the Summary of Significant Accounting Policies footnote on page 44 of this Form 10-K and the Property and Equipment footnote on page 51 of this Form 10-K for additional information.

•Leasing Arrangements

The Lease right-of-use asset and Lease liability include an assumption on renewal options that have not yet been exercised by the Company. The Company also uses an incremental borrowing rate in calculating the Lease liability that represents an estimate of the interest rate the Company would incur to borrow on a collateralized basis over the term of a lease within a particular currency environment. Refer to the Leasing section in the Summary of Significant Accounting Policies footnote on page 44 of this Form 10-K and the Leasing Arrangements footnote on page 52 of this Form 10-K for additional information.

•Long-lived assets impairment review

Long-lived assets (including goodwill) are reviewed for impairment annually. If qualitative indicators of impairment are present, such as changes in global and local business and economic conditions, operating costs, inflation, competition, and consumer and demographic trends, the Company will use these and other factors in estimating future cash flows when testing for the recoverability of its long-lived assets. Estimates of future cash flows are highly subjective judgements based on the Company’s experience and knowledge of its operations. A key assumption impacting estimated future cash flows is the estimated change in comparable sales. If the Company’s estimates or underlying assumptions change in the future, it may be required to record impairment charges. Refer to the Long-lived Assets and Goodwill sections in the Summary of Significant Accounting Policies footnote on page 45 of this Form 10-K for additional information.

•Litigation accruals

In the ordinary course of business, the Company is subject to proceedings, lawsuits and other claims primarily related to competitors, customers, employees, franchisees, government agencies, intellectual property, shareholders and suppliers. The Company is required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. Refer to the Contingencies footnote on page 53 of this Form 10-K for additional information.

•Income taxes

The Company records a valuation allowance to reduce its deferred tax assets if it is considered more likely than not that some portion or all of the deferred tax assets will not be realized.

The Company operates within, and is subject to audit in, multiple taxing jurisdictions. The Company records accruals for the estimated outcomes of these audits, and the accruals may change in the future due to new developments in each matter.

Refer to the Income Taxes section in the Summary of Significant Accounting Policies footnote on page 46 of this Form 10-K and the Income Taxes footnote on page 54 of this Form 10-K for additional information.

EFFECTS OF CHANGING PRICES — INFLATION

Broader inflationary pressures in the economy are expected to continue to impact the restaurant industry through supply chain and labor cost challenges—fueled in part by pent-up demand, supply chain interruptions and rising energy prices. The Company has demonstrated an ability to manage these inflationary cost increases effectively through its rapid inventory turnover, ability to adjust menu prices, cost controls and substantial property holdings, many of which are at fixed costs and partly financed by debt made less expensive by inflation.

McDonald's Corporation 2021 Annual Report 24

Other Key Information

FIVE-YEAR SUMMARY

	Years ended December 31,
In millions, except per share and unit amounts	2021		2020		2019		2018		2017
Consolidated Statement of Income Data
Revenues
Sales by Company-operated restaurants	$	9,787	$	8,139	$	9,421	$	10,013	$	12,719
Revenues from franchised restaurants	13,085		10,726		11,656		11,012		10,101
Other revenues	351		343		288		233		140
Total revenues	23,223		19,208		21,365		21,258		22,960
Operating income	10,356		7,324		9,070		8,823		9,553
Net income	7,545		4,731		6,025		5,924		5,192
Consolidated Statement of Cash Flows Data
Cash provided by operations	$	9,142	$	6,265	$	8,122	$	6,967	$	5,551
Cash used for (provided by) investing activities	2,166		1,546		3,071		2,455		(562)
Capital expenditures	2,040		1,641		2,394		2,742		1,854
Cash used for financing activities	5,596		2,249		4,995		5,950		5,311
Treasury stock purchases(1)	846		874		4,980		5,247		4,651
Common stock dividends	3,919		3,753		3,582		3,256		3,089
Financial Position
Total assets(2)	$	53,854	$	52,627	$	47,511	$	32,811	$	33,804
Total debt	35,623		37,440		34,177		31,075		29,536
Total shareholders’ equity (deficit)	(4,601)		(7,825)		(8,210)		(6,258)		(3,268)
Shares outstanding	745		745		746		767		794
Per Common Share Data
Earnings-diluted	$	10.04	$	6.31	$	7.88	$	7.54	$	6.37
Dividends declared	5.25		5.04		4.73		4.19		3.83
Market price at year end	268.07		214.58		197.61		177.57		172.12
Restaurant Information and Other Data
Restaurants at year end
Company-operated restaurants	2,736		2,677		2,636		2,770		3,133
Franchised restaurants	37,295		36,521		36,059		35,085		34,108
Total Systemwide restaurants	40,031		39,198		38,695		37,855		37,241
Franchised sales(3)	$	102,675	$	85,178	$	90,757	$	86,134	$	78,191

(1)Represents treasury stock purchases as reflected in Shareholders' equity. Treasury stock purchases decreased from 2019 to 2020 as the Company suspended its share repurchase program in March 2020. The Company resumed its share repurchase program in the third quarter of 2021.

(2)Total assets increased from 2018 to 2019 primarily due to the Company's Lease right-of-use asset recorded as a result of the adoption of Accounting Standard Codification ("ASC") Topic 842, "Leases" ("ASC 842").

(3)While franchised sales are not recorded as revenues by the Company, management believes they are important in understanding the Company's financial performance because these sales are the basis on which the Company calculates and records franchised revenues and are indicative of the financial health of the franchisee base. Franchised restaurants represent 93% of McDonald's restaurants worldwide at December 31, 2021.

McDonald's Corporation 2021 Annual Report 25

STOCK PERFORMANCE GRAPH

At least annually, McDonald's considers which companies comprise a readily identifiable investment peer group. The Company is included in published restaurant indices; however, unlike most other companies included in these indices, which have no or limited international operations, McDonald's does business in more than 100 countries and a substantial portion of its revenues and income is generated outside the U.S. In addition, because of its size, McDonald's inclusion in those indices tends to skew the results. Therefore, the Company believes that such a comparison is not meaningful.

The Company's market capitalization, trading volume and importance in an industry that is vital to the U.S. economy have resulted in McDonald's inclusion in the Dow Jones Industrial Average ("DJIA") since 1985. Like McDonald's, many DJIA companies generate meaningful revenues and income outside the U.S. and some manage global brands. Thus, the Company believes that the use of the DJIA companies as the group for comparison purposes is appropriate.

The following performance graph shows McDonald's cumulative total shareholder returns (i.e., price appreciation and reinvestment of dividends) relative to the Standard & Poor's 500 Stock Index ("S&P 500 Index") and to the DJIA companies for the five-year period ended December 31, 2021. The graph assumes that the value of an investment in McDonald's common stock, the S&P 500 Index and the DJIA companies (including McDonald's) was $100 at December 31, 2016. For the DJIA companies, returns are weighted for market capitalization as of the beginning of each period indicated. These returns may vary from those of the DJIA Index, which is not weighted by market capitalization and may be composed of different companies during the period under consideration.

Company/Index	12/31/2016	12/31/2017	12/31/2018	12/31/2019	12/31/2020	12/31/2021
McDonald's Corporation	$100	$145	$153	$175	$195	$249
S&P 500 Index	$100	$122	$116	$153	$181	$233
Dow Jones Industrials	$100	$128	$124	$155	$170	$206

Source: S&P Capital IQ

McDonald's Corporation 2021 Annual Report 26

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET INFORMATION AND DIVIDEND POLICY

The Company’s common stock trades under the symbol "MCD" and is listed on the New York Stock Exchange in the U.S.

The number of shareholders of record and beneficial owners of the Company’s common stock as of January 31, 2022 was estimated to be 3,400,000.

Given the Company’s returns on its capital investments and significant cash provided by operations, management believes it is prudent to reinvest in the business to drive profitable growth and use excess cash flow to return cash to shareholders over time through dividends and share repurchases. The Company has paid dividends on common stock for 46 consecutive years through 2021 and has increased the dividend amount at least once every year. As in the past, future dividend amounts will be considered after reviewing profitability expectations and financing needs, and will be declared at the discretion of the Company’s Board of Directors.

ISSUER PURCHASES OF EQUITY SECURITIES

The following table presents information related to repurchases of common stock the Company made during the quarter ended December 31, 2021*:

Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(1)
October 1-31, 2021	1,343,834	241.93	1,343,834		$	13,741,799,249
November 1-30, 2021	1,070,261	250.85	1,070,261		13,473,328,837
December 1-31, 2021	750,182	257.22	750,182		13,280,370,238
Total	3,164,277	248.57	3,164,277

*    Subject to applicable law, the Company may repurchase shares directly in the open market, in privately negotiated transactions, or pursuant to derivative instruments and plans complying with Rule 10b5-1, among other types of transactions and arrangements.

(1)On December 31, 2019, the Company's Board of Directors approved a share repurchase program, effective January 1, 2020, that authorized the purchase of up to $15 billion of the Company's outstanding common stock.

McDonald's Corporation 2021 Annual Report 27

RISK FACTORS

Our business results are subject to a variety of risks, including those that are described below and elsewhere in our filings with the SEC. The risks described below are not the only risks we face. Additional risks not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business. If any of these risks materialize or intensify, our expectations (or the underlying assumptions) may change and our performance may be adversely affected.

GLOBAL PANDEMIC

The COVID-19 pandemic has adversely affected and is expected to continue to adversely affect our financial results, condition and outlook.

Health epidemics or pandemics can adversely affect consumer spending and confidence levels and supply availability and costs, as well as the local operations in impacted markets, all of which can affect our financial results, condition and outlook. Importantly, the global pandemic resulting from COVID-19 has disrupted global health, economic and market conditions, consumer behavior and McDonald’s global restaurant operations since early 2020, and has resulted in increased pressure on labor availability and supply chain management. Local and national governmental mandates or recommendations and public perceptions of the risks associated with the COVID-19 pandemic have caused, and we expect will continue to cause, consumer behavior to change, worsening or volatile economic conditions in certain markets, and increased regulatory complexity and compliance costs, each of which could continue to adversely affect our business. In addition, our global operations have been disrupted to varying degrees in different markets and may continue to be disrupted to varying degrees given the unpredictability of the virus, its resurgences and variants and government responses thereto as well as potentially permanent changes to the industry in which we operate. While we cannot predict the duration or scope of the COVID-19 pandemic, the resurgence of infections or the emergence of new variants in one or more markets, the availability, acceptance or effectiveness of vaccines or vaccination rates across the globe, the pandemic has negatively impacted our business and is expected to continue to impact our financial results, condition and outlook in a way that may be material.

The COVID-19 pandemic may also heighten other risks disclosed in these Risk Factors, including, but not limited to, those related to labor availability and costs, supply chain interruptions, commodity costs, consumer behavior, consumer perceptions of our brand and competition.

STRATEGY AND BRAND

If we do not successfully evolve and execute against our business strategies, including the Accelerating the Arches strategy, we may not be able to drive business growth.

To drive Systemwide sales, operating income and free cash flow growth, our business strategies must be effective in maintaining and strengthening customer appeal and capturing additional market share. Whether these strategies are successful depends mainly on our System’s ability to:

•capitalize on our global scale, iconic brand and local market presence to build upon our historic strengths and competitive advantages, such as our marketing, core menu items and digital, delivery and drive thru;

•continue to innovate and differentiate the McDonald’s experience, including by preparing and serving our food in a way that balances value and convenience to our customers with profitability;

•accelerate technology investments for a fast and easy customer experience;

•continue to run great restaurants by driving efficiencies and expanding capacities while continuing to prioritize health and safety;

•identify and develop restaurant sites consistent with our plans for net growth of Systemwide restaurants;

•accelerate our existing strategies, including through growth opportunities and potential acquisitions, investments and partnerships; and

•evolve and adjust our business strategies in response to, among other things, changing consumer behavior, operational restrictions and impacts to our results of operations and liquidity, including as a result of the COVID-19 pandemic.

If we are delayed or unsuccessful in executing our strategies, or if our strategies do not yield the desired results, our business, financial condition and results of operations may suffer.

Failure to preserve the value and relevance of our brand could have an adverse impact on our financial results.

To be successful in the future, we believe we must preserve, enhance and leverage the value of our brand, including our corporate purpose, mission and values. Brand value is based in part on consumer perceptions, which are affected by a variety of factors, including the nutritional content and preparation of our food, the ingredients we use, the manner in which we source commodities and general business practices across the System, including the people practices at McDonald’s restaurants. Consumer acceptance of our offerings is subject to change for a variety of reasons, and some changes can occur rapidly. For example, nutritional, health, environmental and other scientific studies and conclusions, which constantly evolve and may have contradictory implications, drive popular opinion, litigation and regulation (including initiatives intended to drive consumer behavior) in ways that affect the “informal eating out” (“IEO”) segment or perceptions of our brand, generally or relative to available alternatives. Our business could also be impacted by business incidents or practices, whether actual or perceived, particularly if they receive considerable publicity or result in litigation, as well as by our position or perceived lack of position on environmental, social responsibility, public policy, geopolitical and similar matters. Consumer perceptions may also be affected by adverse commentary from third parties, including through social media or conventional media outlets, regarding the quick-service category of the IEO segment or our brand, culture, operations, suppliers or franchisees. If we are unsuccessful in addressing adverse commentary or perceptions, whether or not accurate, our brand and financial results may suffer.

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If we do not anticipate and address evolving consumer preferences and effectively execute our pricing, promotional and marketing plans, our business could suffer.

Our continued success depends on our System’s ability to build upon our historic strengths and competitive advantages. In order to do so, we need to anticipate and respond effectively to continuously shifting consumer demographics and trends in food sourcing, food preparation, food offerings, and consumer behavior and preferences, including with respect to environmental and social responsibility matters, in the IEO segment. If we are not able to predict, or quickly and effectively respond to, these changes, or if our competitors predict or respond more effectively, our financial results could be adversely impacted.

Our ability to build upon our strengths and advantages also depends on the impact of pricing, promotional and marketing plans across the System, and the ability to adjust these plans to respond quickly and effectively to evolving customer behavior and preferences, as well as shifting economic and competitive conditions. Existing or future pricing strategies and marketing plans, as well as the value proposition they represent, are expected to continue to be important components of our business strategy. However, they may not be successful, or may not be as successful as the efforts of our competitors, which could negatively impact sales, guest counts and market share.

Additionally, we operate in a complex and costly advertising environment. Our marketing and advertising programs may not be successful in reaching our customers in the way we intend. Our success depends in part on whether the allocation of our advertising and marketing resources across different channels, including digital marketing, allows us to reach our customers effectively, efficiently and in ways that are meaningful to them. If our advertising and marketing programs are not successful, or are not as successful as those of our competitors, our sales, guest counts and market share could decrease.

Our investments to enhance the customer experience, including through technology, may not generate the expected results.

Our long-term business objectives depend on the successful Systemwide execution of our strategies. We continue to build upon our investments in technology and modernization, digital engagement and delivery in order to transform the customer experience. As part of these investments, we are continuing to place emphasis on improving our service model and strengthening relationships with customers, in part through digital channels and loyalty initiatives, mobile ordering and payment systems, and enhancing our drive thru technologies, which may not generate expected results. We also continue to offer and refine our delivery initiatives, including through growing awareness and trial. Utilizing a third-party delivery service may not have the same level of profitability as a non-delivery transaction, and may introduce additional food quality, food safety and customer satisfaction risks. If these customer experience initiatives are not well executed, or if we do not fully realize the intended benefits of these significant investments, our business results may suffer.

We face intense competition in our markets, which could hurt our business.

We compete primarily in the IEO segment, which is highly competitive. We also face sustained, intense competition from traditional, fast casual and other competitors, which may include many non-traditional market participants such as convenience stores, grocery stores, coffee shops and online retailers. We expect our environment to continue to be highly competitive, and our results in any particular reporting period may be impacted by a contracting IEO segment or by new or continuing actions, product offerings or consolidation of our competitors and third-party partners, which may have a short- or long-term impact on our results.

We compete on the basis of product choice, quality, affordability, service and location. In particular, we believe our ability to compete successfully in the current market environment depends on our ability to improve existing products, successfully develop and introduce new products, price our products appropriately, deliver a relevant customer experience, manage the complexity of our restaurant operations, manage our investments in technology and modernization, and respond effectively to our competitors’ actions or offerings or to unforeseen disruptive actions. There can be no assurance these strategies will be effective, and some strategies may be effective at improving some metrics while adversely affecting other metrics, which could have the overall effect of harming our business.

We may not be able to adequately protect our intellectual property or adequately ensure that we are not infringing the intellectual property of others, which could harm the value of the McDonald’s brand and our business.

The success of our business depends on our continued ability to use our existing trademarks and service marks in order to increase brand awareness and further develop our branded products in both domestic and international markets. We rely on a combination of trademarks, copyrights, service marks, trade secrets, patents and other intellectual property rights to protect our brand and branded products.

We have registered certain trademarks and have other trademark registrations pending in the U.S. and certain foreign jurisdictions. The trademarks that we currently use have not been registered in all of the countries outside of the U.S. in which we do business or may do business in the future and may never be registered in all of these countries. It may be costly and time consuming to protect our intellectual property, and the steps we have taken to do so in the U.S. and foreign countries may not be adequate. In addition, the steps we have taken may not adequately ensure that we do not infringe the intellectual property of others, and third parties may claim infringement by us in the future. In particular, we may be involved in intellectual property claims, including often aggressive or opportunistic attempts to enforce patents used in information technology systems, which might affect our operations and results. Any claim of infringement, whether or not it has merit, could be time-consuming, result in costly litigation and harm our business.

We cannot ensure that franchisees and other third parties who hold licenses to our intellectual property will not take actions that hurt the value of our intellectual property.

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OPERATIONS

The global scope of our business subjects us to risks that could negatively affect our business.

We encounter differing cultural, regulatory, geopolitical and economic environments within and among the more than 100 countries where McDonald’s restaurants operate, and our ability to achieve our business objectives depends on the System’s success in these environments. Meeting customer expectations is complicated by the risks inherent in our global operating environment, and our global success is partially dependent on our System’s ability to leverage operating successes across markets and brand perceptions. Planned initiatives may not have appeal across multiple markets with McDonald’s customers and could drive unanticipated changes in customer perceptions and guest counts.

Disruptions in operations or price volatility in a market can also result from governmental actions, such as price, foreign exchange or changes in trade-related tariffs or controls, sanctions and counter sanctions, government-mandated closure of our, our franchisees’ or our suppliers’ operations, and asset seizures. Trade policies, tariffs and other regulations affecting trade between the U.S. and other countries could adversely affect our business and operations. These and other government actions may impact our results and could cause reputational or other harm. Our international success depends in part on the effectiveness of our strategies and brand-building initiatives to reduce our exposure to such governmental actions.

Additionally, there are challenges and uncertainties associated with operating in developing markets, which may entail a relatively higher risk of political instability, economic volatility, crime, corruption and social and ethnic unrest. In many cases, such challenges may be exacerbated by the lack of an independent and experienced judiciary and uncertainty in how local law is applied and enforced, including in areas most relevant to commercial transactions and foreign investment. An inability to manage effectively the risks associated with our international operations could have a material adverse effect on our business and financial condition.

We may also face challenges and uncertainties in developed markets. For example, the U.K.’s exit from the European Union has caused increased regulatory complexities and uncertainty in European economic conditions and may also cause uncertainty in worldwide economic conditions. The decision created volatility in certain foreign currency exchange rates that may or may not continue, and may result in increased supply chain costs for items that are imported from other countries. Any of these effects, and others we cannot anticipate, could adversely affect our business, results of operations, financial condition and cash flows.

Supply chain interruptions may increase costs or reduce revenues.

We depend on the effectiveness of our supply chain management to assure reliable and sufficient supply of quality products on favorable terms. Although many of the products we sell are sourced from a wide variety of suppliers in countries around the world, certain products have limited suppliers, which may increase our reliance on those suppliers. Supply chain interruptions and related price increases can adversely affect us as well as our suppliers and franchisees, whose performance may have a significant impact on our results. Such interruptions and price increases could be caused by shortages, unexpected increases in demand, transportation issues, labor issues, weather-related events, natural disasters or other factors beyond the control of us or our suppliers or franchisees. If we experience interruptions in our System’s supply chain, or if contingency planning is not effective, our costs could increase and/or the availability of products critical to our System’s operations could be limited.

Our franchise business model presents a number of risks.

Our success as a heavily franchised business relies to a large degree on the financial success and cooperation of our franchisees, including our developmental licensees and affiliates. Our restaurant margins arise from two sources: fees from franchised restaurants (e.g., rent and royalties based on a percentage of sales) and, to a lesser degree, sales from Company-operated restaurants. Our franchisees and developmental licensees manage their businesses independently and therefore are responsible for the day-to-day operation of their restaurants. The revenues we realize from franchised restaurants are largely dependent on the ability of our franchisees to grow their sales. Business risks affecting our operations also affect our franchisees. In particular, our franchisees have also been impacted by the COVID-19 pandemic and the volatility associated with the pandemic. If franchisee sales trends worsen or volatility persists, our financial results could be negatively affected, which may be material.

Our success also relies on the willingness and ability of our independent franchisees and affiliates to implement major initiatives, which may include financial investment, and to remain aligned with us on operating, value/promotional and capital-intensive reinvestment plans. The ability of franchisees to contribute to the achievement of our plans is dependent in large part on the availability to them of funding at reasonable interest rates and may be negatively impacted by the financial markets in general, by their or our creditworthiness or by banks’ lending practices. If our franchisees are unwilling or unable to invest in major initiatives or are unable to obtain financing at commercially reasonable rates, or at all, our future growth and results of operations could be adversely affected.

Our operating performance could also be negatively affected if our franchisees experience food safety or other operational problems or project an image inconsistent with our brand and values, particularly if our contractual and other rights and remedies are limited, costly to exercise or subjected to litigation and potential delays. If franchisees do not successfully operate restaurants in a manner consistent with our required standards, our brand’s image and reputation could be harmed, which in turn could hurt our business and operating results.

Our ownership mix also affects our results and financial condition. The decision to own restaurants or to operate under franchise or license agreements is driven by many factors whose interrelationship is complex. The benefits of our more heavily franchised structure depend on various factors including whether we have effectively selected franchisees, licensees and/or affiliates that meet our rigorous standards, whether we are able to successfully integrate them into our structure and whether their performance and the resulting ownership mix supports our brand and financial objectives.

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Challenges with respect to labor, including availability and cost, could impact our business and results of operations.

Our success depends in part on our System’s ability to proactively recruit, motivate and retain qualified individuals to work in McDonald’s restaurants and to maintain appropriately-staffed restaurants in an intensely competitive labor market. If we or our franchisees are unable to adequately staff McDonald’s restaurants, it could negatively impact our operations, including speed of service to customers, and customer satisfaction levels. The System’s ability to meet its labor needs is generally subject to external factors, including the availability of sufficient workforce, unemployment levels and prevailing wages in the markets in which we operate.

Further, increased costs and competition associated with recruiting, motivating and retaining qualified employees, as well as costs associated with promoting awareness of the opportunities of working at McDonald’s restaurants, could have a negative impact on our Company-operated margins and our franchisees’ profitability.

We are also impacted by the costs and other effects of compliance with U.S. and international regulations affecting our workforce, which includes our staff and employees working in our Company-operated restaurants. These regulations are increasingly focused on employment issues, including wage and hour, healthcare, immigration, retirement and other employee benefits and workplace practices. Claims of non-compliance with these regulations could result in liability and expense to us. Our potential exposure to reputational and other harm regarding our workplace practices or conditions or those of our independent franchisees or suppliers, including those giving rise to claims of harassment or discrimination (or perceptions thereof) or workplace safety, could have a negative impact on consumer perceptions of us and our business. Additionally, economic action, such as boycotts, protests, work stoppages or campaigns by labor organizations, could adversely affect us (including our ability to recruit, motivate and retain talent) or our franchisees and suppliers, whose performance may have a significant impact on our results.

Effective succession planning is important to our continued success.

Effective succession planning is important to our long-term success. Failure to effectively identify, develop and retain key personnel, recruit high-quality candidates and ensure smooth management and personnel transitions could disrupt our business and adversely affect our results.

Food safety concerns may have an adverse effect on our business.

Our ability to increase sales and profits depends on our System’s ability to meet expectations for safe food and on our ability to manage the potential impact on McDonald’s of food-borne illnesses and food or product safety issues that may arise in the future, including in the supply chain, restaurants or delivery. Food safety is a top priority, and we dedicate substantial resources to ensure that our customers enjoy safe food products, including as our menu and service model evolve. However, food safety events, including instances of food-borne illness, occur within the food industry and our System from time to time and could occur in the future. Instances of food tampering, food contamination or food-borne illness, whether actual or perceived, could adversely affect our brand and reputation, as well as our financial results.

If we do not effectively manage our real estate portfolio, our operating results may be negatively impacted.

We have significant real estate operations, primarily in connection with our restaurant business. We generally own or secure a long-term lease on the land and building for conventional franchised and Company-operated restaurant sites. We seek to identify and develop restaurant locations that offer convenience to customers and long-term sales and profit potential. As we generally secure long-term real estate interests for our restaurants, we have limited flexibility to quickly alter our real estate portfolio. The competitive business landscape continues to evolve in light of changing business trends, consumer preferences, trade area demographics, consumer use of digital, delivery and drive thru, local competitive positions and other economic factors. If our restaurants are not located in desirable locations, or if we do not evolve in response to these factors, it could adversely affect Systemwide sales and profitability.

Our real estate values and the costs associated with our real estate operations are also impacted by a variety of other factors, including governmental regulations, insurance, zoning, tax and eminent domain laws, interest rate levels and the cost of financing. A significant change in real estate values, or an increase in costs as a result of any of these factors, could adversely affect our operating results.

Information technology system failures or interruptions, or breaches of network security, may impact our operations or cause reputational harm.

We are increasingly reliant upon technology systems, such as point-of-sale, technologies that support our digital and delivery solutions, and technologies that facilitate communication and collaboration with affiliated entities, customers, employees, franchisees, suppliers, service providers or other independent third parties to conduct our business, whether developed and maintained by us or provided by third parties. Any failure or interruption of these systems could significantly impact our or our franchisees’ operations, or our customers’ experience and perceptions.

Security incidents or breaches have from time to time occurred and may in the future occur involving our systems, the systems of the parties we communicate or collaborate with (including franchisees) or the systems of third-party providers. These may include such things as unauthorized access, phishing attacks, account takeovers, denial of service, computer viruses, introduction of malware or ransomware and other disruptive problems caused by hackers. Certain of these technology systems contain personal, financial and other information of our customers, employees, franchisees, business customers and other third parties, as well as financial, proprietary and other confidential information related to our business. Despite response procedures and measures in place in the event of an incident, a security breach could result in disruptions, shutdowns, or the theft or unauthorized disclosure of such information. The actual or alleged occurrence of any of these incidents could result in mitigation costs, reputational damage, adverse publicity, loss of consumer confidence, reduced sales and profits, complications in executing our growth initiatives and regulatory and legal risk, including criminal penalties or civil liabilities.

We also provide certain technology systems to businesses that are unaffiliated with the McDonald’s System and a failure, interruption or breach of these systems may cause harm to those unaffiliated parties, which may result in liability to us or reputational harm.

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Despite the implementation of security measures, any of these technology systems could become vulnerable to damage, disability or failures due to theft, fire, power loss, telecommunications failure or other catastrophic events. Certain technology systems may also become vulnerable, unreliable or inefficient in cases where technology vendors limit or terminate product support and maintenance. Our increasing reliance on third-party systems also subjects us to risks faced by those third-party businesses, including operational, security and credit risks. If technology systems were to fail or otherwise be unavailable, or if business continuity or disaster recovery plans were not effective, and we were unable to recover in a timely manner, we could experience an interruption in our or our franchisees’ operations.

LEGAL AND REGULATORY

Increasing regulatory and legal complexity may adversely affect our business and financial results.

Our regulatory and legal environment worldwide exposes us to complex compliance, litigation and similar risks that could affect our operations and results in material ways. Many of our markets are subject to increasing, conflicting and highly prescriptive regulations involving, among other matters, restaurant operations, product packaging, marketing, the nutritional and allergen content and safety of our food and other products, labeling and other disclosure practices. Compliance efforts with those regulations may be affected by ordinary variations in food preparation among our own restaurants and the need to rely on the accuracy and completeness of information from third-party suppliers. We also are subject to increasing public focus, including by governmental and non-governmental organizations, on environmental, social responsibility and corporate governance (“ESG”) initiatives. Our success depends in part on our ability to manage the impact of regulations and other initiatives that can affect our business plans and operations, which have increased and may continue to increase our costs of doing business and exposure to litigation, governmental investigations or other proceedings.

We are also subject to legal proceedings that may adversely affect our business, including class actions, administrative proceedings, government investigations and proceedings, shareholder proceedings, employment and personal injury claims, landlord/tenant disputes, supplier-related disputes, and claims by current or former franchisees. Regardless of whether claims against us are valid or whether we are found to be liable, claims may be expensive to defend and may divert management’s attention away from operations.

Litigation and regulatory action concerning our relationship with franchisees and the legal distinction between our franchisees and us for employment law or other purposes, if determined adversely, could increase costs, negatively impact our business operations and the business prospects of our franchisees and subject us to incremental liability for their actions. Similarly, although our commercial relationships with our suppliers remain independent, there may be attempts to challenge that independence, which, if determined adversely, could also increase costs, negatively impact the business prospects of our suppliers, and subject us to incremental liability for their actions.

Our results could also be affected by the following:

•the relative level of our defense costs, which vary from period to period depending on the number, nature and procedural status of pending proceedings;

•the cost and other effects of settlements, judgments or consent decrees, which may require us to make disclosures or take other actions that may affect perceptions of our brand and products; and

•adverse results of pending or future litigation, including litigation challenging the composition and preparation of our products, or the appropriateness or accuracy of our marketing or other communication practices.

A judgment significantly in excess of any applicable insurance coverage or third-party indemnity could materially adversely affect our financial condition or results of operations. Further, adverse publicity resulting from claims may hurt our business. If we are unable to effectively manage the risks associated with our complex regulatory and legal environment, it could have a material adverse effect on our business and financial condition.

Changes in tax laws and unanticipated tax liabilities could adversely affect the taxes we pay and our profitability.

We are subject to income and other taxes in the U.S. and foreign jurisdictions, and our operations, plans and results are affected by tax and other initiatives around the world. In particular, we are affected by the impact of changes to tax laws or policy or related authoritative interpretations. We are also impacted by settlements of pending or any future adjustments proposed by taxing and governmental authorities inside and outside of the U.S. in connection with our tax audits, all of which will depend on their timing, nature and scope. Any significant increases in income tax rates, changes in income tax laws or unfavorable resolution of tax matters could have a material adverse impact on our financial results.

Changes in accounting standards or the recognition of impairment or other charges may adversely affect our future operations and results.

New accounting standards or changes in financial reporting requirements, accounting principles or practices, including with respect to our critical accounting estimates, could adversely affect our future results. We may also be affected by the nature and timing of decisions about underperforming markets or assets, including decisions that result in impairment or other charges that reduce our earnings.

In assessing the recoverability of our long-lived assets, we consider changes in economic conditions and make assumptions regarding estimated future cash flows and other factors. These estimates are highly subjective and can be significantly impacted by many factors such as global and local business and economic conditions, operating costs, inflation, competition, consumer and demographic trends and our restructuring activities. If our estimates or underlying assumptions change in the future, we may be required to record impairment charges. If we experience any such changes, they could have a significant adverse effect on our reported results for the affected periods.

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If we fail to comply with privacy and data collection laws, we could be subject to legal proceedings and penalties, which could negatively affect our financial results or brand perceptions.

We are subject to legal and compliance risks and associated liability related to privacy and data collection, protection and management as it relates to information associated with our technology-related services and platforms made available to business partners, customers, employees, franchisees or other third parties. For example, the General Data Protection Regulation (“GDPR”) requires entities processing the personal data of individuals in the European Union to meet certain requirements regarding the handling of that data. We are also subject to U.S. federal and state and foreign laws and regulations in this area such as the California Consumer Privacy Act (“CCPA”). These regulations have been subject to frequent change, and there may be markets or jurisdictions that propose or enact new or emerging data privacy requirements in the future. Failure to comply with GDPR, CCPA or other privacy and data collection laws could result in legal proceedings and substantial penalties and materially adversely impact our financial results or brand perceptions.

MACROECONOMIC AND MARKET CONDITIONS

Unfavorable general economic conditions could adversely affect our business and financial results.

Our results of operations are substantially affected by economic conditions, including inflationary pressures, which can vary significantly by market and can impact consumer disposable income levels and spending habits. Economic conditions can also be impacted by a variety of factors including hostilities, epidemics, pandemics and actions taken by governments to manage national and international economic matters, whether through austerity, stimulus measures or trade measures, and initiatives intended to control wages, unemployment, credit availability, inflation, taxation and other economic drivers. Sustained adverse economic conditions or periodic adverse changes in economic conditions in our markets could pressure our operating performance and our business continuity disruption planning, and our business and financial results may suffer.

Our results of operations are also affected by fluctuations in currency exchange rates and unfavorable currency fluctuations could adversely affect reported earnings.

Changes in commodity and other operating costs could adversely affect our results of operations.

The profitability of our Company-operated restaurants depends in part on our ability to anticipate and react to changes in commodity costs, including food, paper, supplies, fuel, utilities, distribution and other operating costs, including labor. Any volatility in certain commodity prices or fluctuation in labor costs could adversely affect our operating results by impacting restaurant profitability. The commodity markets for some of the ingredients we use, such as beef, chicken and pork, are particularly volatile due to factors such as seasonal shifts, climate conditions, industry demand, international commodity markets, food safety concerns, product recalls and government regulation, all of which are beyond our control and, in many instances, unpredictable. Our System can only partially address future price risk through hedging and other activities, and therefore increases in commodity costs could have an adverse impact on our profitability.

A decrease in our credit ratings or an increase in our funding costs could adversely affect our profitability.

Our credit ratings may be negatively affected by our results of operations or changes in our debt levels. As a result, our interest expense, the availability of acceptable counterparties, our ability to obtain funding on favorable terms, our collateral requirements and our operating or financial flexibility could all be negatively affected, especially if lenders impose new operating or financial covenants.

Our operations may also be impacted by regulations affecting capital flows, financial markets or financial institutions, which can limit our ability to manage and deploy our liquidity or increase our funding costs. If any of these events were to occur, they could have a material adverse effect on our business and financial condition.

Trading volatility and the price of our common stock may be adversely affected by many factors.

Many factors affect the volatility and price of our common stock in addition to our operating results and prospects. The most important of these factors, some of which are outside our control, are the following:

•the unpredictable nature of global economic and market conditions;

•governmental action or inaction in light of key indicators of economic activity or events that can significantly influence financial markets, particularly in the U.S., which is the principal trading market for our common stock, and media reports and commentary about economic, trade or other matters, even when the matter in question does not directly relate to our business;

•trading activity in our common stock, in derivative instruments with respect to our common stock or in our debt securities, which can be affected by market commentary (including commentary that may be unreliable or incomplete); unauthorized disclosures about our performance, plans or expectations about our business; our actual performance and creditworthiness; investor confidence, driven in part by expectations about our performance; actions by shareholders and others seeking to influence our business strategies; portfolio transactions in our common stock by significant shareholders; or trading activity that results from the ordinary course rebalancing of stock indices in which McDonald’s may be included, such as the S&P 500 Index and the Dow Jones Industrial Average;

•the impact of our stock repurchase program or dividend rate; and

•the impact on our results of corporate actions and market and third-party perceptions and assessments of such actions, such as those we may take from time to time as we implement our strategies, including through acquisitions, in light of changing business, legal and tax considerations and evolve our corporate structure.

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Our business is subject to an increasing focus on ESG matters.

In recent years, there has been an increasing focus by stakeholders – including employees, franchisees, customers, suppliers, governmental and non-governmental organizations and investors – on ESG matters. A failure, whether real or perceived, to address ESG matters or to achieve progress on our ESG initiatives could adversely affect our business, including by heightening other risks disclosed in these Risk Factors, such as those related to consumer behavior, consumer perceptions of our brand, labor availability and costs, supply chain interruptions, commodity costs, and legal and regulatory complexity. Conversely, our taking a position, whether real or perceived, on ESG, public policy, geopolitical and similar matters could adversely impact our business.

The standards we set for ourselves regarding ESG matters, and our ability to meet such standards, may also impact our business. For example, we are working to manage risks and costs to our System related to climate change, greenhouse gases, and diminishing energy and water resources, and we have announced initiatives relating to, among other things, environmental sustainability, responsible sourcing and increasing diverse representation across our System. We may face increased scrutiny related to reporting on and achieving these initiatives, as well as continued public focus on similar matters, such as packaging and waste, animal health and welfare, deforestation and land use. We may also face increased pressure from stakeholders to provide expanded disclosure and establish additional commitments, targets or goals, and take actions to meet them, which could expose us to additional market, operational, execution and reputational costs and risks. Moreover, addressing ESG matters requires Systemwide coordination and alignment, and the standards by which certain ESG matters are measured are evolving and subject to assumptions that could change over time.

Events such as severe weather conditions, natural disasters, hostilities and social unrest, among others, can adversely affect our results and prospects.

Severe weather conditions, natural disasters, hostilities and social unrest, climate change or terrorist activities (or expectations about them) can adversely affect consumer behavior and confidence levels, supply availability and costs and local operations in impacted markets, all of which can affect our results and prospects. Climate change may also increase the frequency and severity of such weather-related events and natural disasters. Our receipt of proceeds under any insurance we maintain with respect to some of these risks may be delayed or the proceeds may be insufficient to cover our losses fully.

LEGAL PROCEEDINGS

The Company has pending a number of lawsuits that have been filed in various jurisdictions. These lawsuits cover a broad variety of allegations spanning the Company’s business. The following is a brief description of the more significant types of such claims and lawsuits. In addition, the Company is subject to various national and local laws and regulations that impact various aspects of its business, as discussed under “Government Regulations” below. While the Company does not believe that any such claims, lawsuits, laws or regulations will have a material adverse effect on its financial condition or results of operations, unfavorable rulings could occur. Were an unfavorable ruling to occur, it could result in a material adverse impact on the Company’s net income for the period in which it occurs and/or future periods.

▪Franchising

A substantial number of McDonald’s restaurants are franchised to independent owner/operators and developmental licensees under contractual arrangements with the Company. In the course of the franchise relationship, occasional disputes arise between the Company and its current or former franchisees relating to a broad range of subjects, including, but not limited to, quality, service and cleanliness issues, menu pricing, contentions regarding franchise grants or terminations, alleged discrimination, delinquent payments of rents and fees and claims for additional franchises or franchise renewals. Occasional disputes also arise between the Company and individuals who claim they should have been granted a franchise or who challenge the legal distinction between the Company and its franchisees for employment law purposes.

▪Suppliers

The Company and its affiliates and subsidiaries generally do not supply food, paper or related items to any McDonald’s restaurants. The Company relies upon numerous independent suppliers, including service providers, that are required to meet and maintain the Company’s high standards and specifications. On occasion, disputes arise between the Company and its current or former suppliers relating to, for example, compliance with product specifications and the Company’s business relationship with suppliers. Occasional disputes also arise between the Company and individuals or entities who claim that they should be (or should have been) granted the opportunity to supply products or services to the Company’s restaurants.

▪Employees

Hundreds of thousands of people are employed by the Company and in restaurants owned and operated by subsidiaries of the Company. In addition, thousands of people from time to time seek employment in such restaurants. In the ordinary course of business, disputes occasionally arise regarding hiring, termination, promotion and pay practices, including, but not limited to, wage and hour disputes, alleged discrimination and compliance with labor and employment laws.

▪Customers

McDonald’s restaurants – whether owned by subsidiaries of the Company, independent owner/operators or developmental licensees – regularly serve a broad segment of the public. In so doing, disputes occasionally arise as to products, service, incidents, pricing, advertising, nutritional and other disclosures, as well as other matters common to an extensive restaurant business such as that of the Company.

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▪Intellectual Property

The Company has registered trademarks, service marks, patents and copyrights, some of which are of material importance to its business. From time to time, the Company may become involved in litigation to protect its intellectual property and defend against the alleged use of third-party intellectual property.

▪Government Regulations

National and local governments have adopted laws and regulations involving various aspects of the restaurant business, including, but not limited to, advertising, franchising, health, safety, environment, competition, zoning, employment and taxation. The Company is occasionally involved in litigation or other proceedings regarding these matters. While the Company strives to comply with all applicable existing statutory and administrative rules, it cannot predict the effect on its operations of these matters or the issuance of any future additional requirements.

PROPERTIES

The Company owns and leases real estate primarily in connection with its restaurant business. The Company identifies and develops sites that offer convenience to customers and long-term sales and profit potential to the System. To assess potential, the Company analyzes traffic and walking patterns, census data and other relevant data. The Company’s experience and access to advanced technology aid in evaluating this information. The Company generally owns or secures a long-term lease on the land and building for conventional franchised and Company-operated restaurant sites, which facilitates long-term occupancy rights and helps control related costs. Restaurant profitability for both the Company and franchisees is important; therefore, ongoing efforts are made to control average development costs through construction and design efficiencies, standardization and by leveraging the Company’s global sourcing network.

In addition, the Company primarily leases real estate in connection with its corporate headquarters, field and other offices.

Additional information about the Company’s properties is included in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section beginning on page 8 of this Form 10-K and in the Financial Statements and Supplementary Data section beginning on page 37 of this Form 10-K.

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INFORMATION ABOUT OUR EXECUTIVE OFFICERS

The following are the Executive Officers of the Company (as of the date of this filing):

Ian Borden, 53, is President, International, a position he has held since January 2020. Prior to that, Mr. Borden served as President – International Developmental Licensed Markets from January 2019 to December 2019 and as President – Foundational Markets from July 2015 to December 2018. Mr. Borden has served the Company for 27 years.

Heidi Capozzi, 52, is Corporate Executive Vice President – Chief People Officer, a position she has held since April 2020. Prior to joining the Company, Ms. Capozzi served as Senior Vice President of Human Resources for The Boeing Company, a manufacturer of commercial jetliners and defense, space and security systems, from 2016 to April 2020.

Francesca A. DeBiase, 56, is Corporate Executive Vice President – Global Chief Supply Chain Officer, a position she has held since October 2020. Prior to that, Ms. DeBiase served as Corporate Executive Vice President – Worldwide Supply Chain and Sustainability from April 2018 to October 2020 and as Corporate Senior Vice President – Worldwide Supply Chain and Sustainability from March 2015 to March 2018. Ms. DeBiase has served the Company for 30 years.

Joseph Erlinger, 48, is President, McDonald's USA, a position he has held since November 2019. Prior to that, Mr. Erlinger served as President – International Operated Markets from January 2019 to October 2019 and as President – High Growth Markets from September 2016 to December 2018. From March 2015 to January 2017, Mr. Erlinger served as Vice President and Chief Financial Officer – High Growth Markets (serving in dual roles from September 2016 to January 2017). Mr. Erlinger has served the Company for nearly 20 years.

Katherine Beirne Fallon, 46, is Corporate Executive Vice President – Chief Global Impact Officer, a position she has held since October 2020. Prior to joining the Company, Ms. Fallon served as Executive Vice President, Global Corporate Affairs for Hilton, a global hospitality company, from November 2016 to October 2020.

Daniel Henry, 51, is Corporate Executive Vice President – Chief Information Officer, a position he has held since May 2018. Prior to that, Mr. Henry served as Corporate Vice President – Chief Information Officer from October 2017 to April 2018. Prior to joining the Company, Mr. Henry served as Vice President of Customer Technology and Enterprise Architecture for American Airlines, an international airline company, from April 2012 to October 2017. Mr. Henry has served the Company for four years.

Catherine Hoovel, 51, is Corporate Senior Vice President – Corporate Controller, a position she has held since July 2021. Prior to that, Ms. Hoovel served as Corporate Vice President – Chief Accounting Officer from October 2016 to July 2021 and as Controller for the McDonald's restaurants owned and operated by McDonald's USA from April 2014 to September 2016. Ms. Hoovel has served the Company for 25 years.

Christopher Kempczinski, 53, is President and Chief Executive Officer, a position he has held since November 2019. Prior to that, Mr. Kempczinski served as President, McDonald’s USA from December 2016 to October 2019 and as Corporate Executive Vice President – Strategy, Business Development and Innovation from October 2015 to December 2016. Mr. Kempczinski joined the Company from Kraft Heinz, where he most recently served as Executive Vice President of Growth Initiatives and President of Kraft International. Mr. Kempczinski has served the Company for six years.

Kevin Ozan, 58, is Corporate Executive Vice President and Chief Financial Officer, a position he has held since March 2015. Prior to that, Mr. Ozan served as Corporate Senior Vice President – Controller from February 2008 to February 2015. Mr. Ozan has served the Company for 24 years.

Desiree Ralls-Morrison, 55, is Corporate Executive Vice President, General Counsel and Secretary, a position she has held since April 2021. Prior to joining the Company, Ms. Ralls-Morrison served as Senior Vice President, General Counsel and Corporate Secretary for Boston Scientific, a medical device manufacturer, from November 2017 to April 2021 and as Senior Vice President, General Counsel and Corporate Secretary for Boehringer Ingelheim USA, a pharmaceutical company, from October 2013 to October 2017.

Manu Steijaert, 51, is Corporate Executive Vice President – Chief Customer Officer, a position he has held since August 2021. Prior to that, Mr. Steijaert served as Vice President, International Operated Markets from January 2019 to July 2021 and as Managing Director, Netherlands from July 2015 through January 2019. Mr. Steijaert has served the Company for nearly 20 years.

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AVAILABILITY OF COMPANY INFORMATION

The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended ("Exchange Act"). The Company therefore files periodic reports, proxy statements and other information with the SEC. Such reports may be obtained by visiting the SEC's website at www.sec.gov.

Financial and other information can also be accessed on the investor section of the Company’s website at www.investor.mcdonalds.com. The Company uses this website as a primary channel for disclosing key information to its investors, some of which may contain material and previously non-public information. The Company makes available, free of charge, copies of its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the SEC. Copies of financial and other information are also available free of charge by calling (800) 228-9623.

Also posted on McDonald’s website are the Company’s Corporate Governance Principles; the charters for each committee of the Company's Board of Directors, including the Audit & Finance Committee, Compensation Committee, Governance Committee, Public Policy & Strategy Committee and Sustainability & Corporate Responsibility Committee; the Code of Conduct for the Board of Directors; and the Company’s Standards of Business Conduct, which applies to all officers and employees. Copies of these documents are also available free of charge by calling (800) 228-9623.

The websites included in this Form 10-K, including those of the Company and the SEC, are provided for convenience only. Information contained on or accessible through such websites is not incorporated herein and does not constitute a part of this Form 10-K or the Company's other filings with the SEC.

Financial Statements and Supplementary Data
Index to consolidated financial statements		Page reference
Consolidated statement of income for each of the three years in the period ended December 31, 2021		38
Consolidated statement of comprehensive income for each of the three years in the period ended December 31, 2021		39
Consolidated balance sheet at December 31, 2021 and 2020		40
Consolidated statement of cash flows for each of the three years in the period ended December 31, 2021		41
Consolidated statement of shareholders’ equity for each of the three years in the period ended December 31, 2021		42
Notes to consolidated financial statements		43
Management’s assessment of internal control over financial reporting		60
Report of independent registered public accounting firm—PCAOB ID:	42	61
Report of independent registered public accounting firm on internal control over financial reporting		63

McDonald's Corporation 2021 Annual Report 37

Consolidated Statement of Income 

In millions, except per share data	Years ended December 31, 2021			2020		2019
REVENUES
Sales by Company-operated restaurants		$	9,787.4	$	8,139.2	$	9,420.8
Revenues from franchised restaurants		13,085.4		10,726.1		11,655.7
Other revenues		350.1		342.5		287.9
Total revenues		23,222.9		19,207.8		21,364.4
OPERATING COSTS AND EXPENSES
Company-operated restaurant expenses
Food & paper		3,096.8		2,564.2		2,980.3
Payroll & employee benefits		2,677.2		2,416.4		2,704.4
Occupancy & other operating expenses		2,273.3		2,000.6		2,075.9
Franchised restaurants-occupancy expenses		2,335.0		2,207.5		2,200.6
Other restaurant expenses		260.4		267.0		223.8
Selling, general & administrative expenses
Depreciation and amortization		329.7		300.6		262.5
Other		2,377.8		2,245.0		1,966.9
Other operating (income) expense, net		(483.3)		(117.5)		(119.8)
Total operating costs and expenses		12,866.9		11,883.8		12,294.6
Operating income		10,356.0		7,324.0		9,069.8
Interest expense-net of capitalized interest of $6.8, $6.0 and $7.4		1,185.8		1,218.1		1,121.9
Nonoperating (income) expense, net		42.3		(34.8)		(70.2)
Income before provision for income taxes		9,127.9		6,140.7		8,018.1
Provision for income taxes		1,582.7		1,410.2		1,992.7
Net income		$	7,545.2	$	4,730.5	$	6,025.4
Earnings per common share–basic		$	10.11	$	6.35	$	7.95
Earnings per common share–diluted		$	10.04	$	6.31	$	7.88
Dividends declared per common share		$	5.25	$	5.04	$	4.73
Weighted-average shares outstanding–basic		746.3