McDonald's (MCD) 10-K risk factor changes: FY2023 vs FY2022

For the fiscal year ended December 31, [removed: 2022][added: 2023]

[removed: ][added: ]

The aggregate market value of the registrant's common stock held by non-affiliates as of June 30, [removed: 2022: $181,588,534,180.][added: 2023: 217,448,941,822.]

The number of shares outstanding of the registrant’s common stock as of January 31, [removed: 2023: 731,496,951.][added: 2024: 722,051,488.]

Part III of this Form 10-K incorporates information by reference from the registrant’s [removed: 2023] [added: 2024] definitive proxy statement, which will be filed no later than 120 days after December 31, [removed: 2022.][added: 2023.]

| | | | | | | [removed: 2022] [added: 2023] Financial Performance | | | [8](#i6d278eb3cca24d478428bd1e8807ef56_25) | | |

| | | | | | | Outlook | | | [removed: [10](#i6d278eb3cca24d478428bd1e8807ef56_28)] [added: [11](#i6d278eb3cca24d478428bd1e8807ef56_28)] | | |

| | | | | | | Consolidated Operating Results | | | [removed: [11](#i6d278eb3cca24d478428bd1e8807ef56_31)] [added: [12](#i6d278eb3cca24d478428bd1e8807ef56_31)] | | |

| | | | | | | Cash Flows | | | [removed: [19](#i6d278eb3cca24d478428bd1e8807ef56_37)] [added: [20](#i6d278eb3cca24d478428bd1e8807ef56_37)] | | |

| | | | | | | Financial Position and Capital Resources | | | [removed: [22](#i6d278eb3cca24d478428bd1e8807ef56_40)] [added: [23](#i6d278eb3cca24d478428bd1e8807ef56_40)] | | |

| | | | | | | Other Matters | | | [removed: [24](#i6d278eb3cca24d478428bd1e8807ef56_43)] [added: [25](#i6d278eb3cca24d478428bd1e8807ef56_43)] | | |

| | | | | | | Other Key Information | | | [removed: [25](#i6d278eb3cca24d478428bd1e8807ef56_46)] [added: [26](#i6d278eb3cca24d478428bd1e8807ef56_46)] | | |

| | | | | | | Stock Performance Graph | | | [removed: [25](#i6d278eb3cca24d478428bd1e8807ef56_46)] [added: [26](#i6d278eb3cca24d478428bd1e8807ef56_46)] | | |

| | | | | | | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | | | [removed: [26](#i6d278eb3cca24d478428bd1e8807ef56_55)] [added: [27](#i6d278eb3cca24d478428bd1e8807ef56_55)] | | |

| | | | | | | Risk Factors | | | [removed: [27](#i6d278eb3cca24d478428bd1e8807ef56_58)] [added: [28](#i6d278eb3cca24d478428bd1e8807ef56_58)] | | |

| | | | | | | Legal Proceedings | | | [removed: [33](#i6d278eb3cca24d478428bd1e8807ef56_61)] [added: [35](#i6d278eb3cca24d478428bd1e8807ef56_61)] | | |

| | | | | | | Properties | | | [removed: [33](#i6d278eb3cca24d478428bd1e8807ef56_64)] [added: [35](#i6d278eb3cca24d478428bd1e8807ef56_64)] | | |

| | | | | | | Information About our Executive Officers | | | [removed: [34](#i6d278eb3cca24d478428bd1e8807ef56_67)] [added: [36](#i6d278eb3cca24d478428bd1e8807ef56_67)] | | |

| | | | | | | Availability of Company Information | | | [removed: [35](#i6d278eb3cca24d478428bd1e8807ef56_70)] [added: [37](#i6d278eb3cca24d478428bd1e8807ef56_70)] | | |

| | | | | | | Financial Statements and Supplementary Data | | | [removed: [35](#i6d278eb3cca24d478428bd1e8807ef56_73)] [added: [37](#i6d278eb3cca24d478428bd1e8807ef56_73)] | | |

| | | | | | | Controls and Procedures | | | [removed: [62](#i6d278eb3cca24d478428bd1e8807ef56_217)] [added: [65](#i6d278eb3cca24d478428bd1e8807ef56_217)] | | |

| | | | | | | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | | | [removed: [62](#i6d278eb3cca24d478428bd1e8807ef56_220)] [added: [65](#i6d278eb3cca24d478428bd1e8807ef56_220)] | | |

| | | | | | | [Exhibits and Financial Statement Schedules](#i6d278eb3cca24d478428bd1e8807ef56_223) | | | [removed: [63](#i6d278eb3cca24d478428bd1e8807ef56_223)] [added: [66](#i6d278eb3cca24d478428bd1e8807ef56_223)] | | |

| | | | | | | Form 10-K Cross-Reference Index | | | [removed: [65](#i6d278eb3cca24d478428bd1e8807ef56_226)] [added: [68](#i6d278eb3cca24d478428bd1e8807ef56_226)] | | |

| | | | | | | [Signatures](#i6d278eb3cca24d478428bd1e8807ef56_229) | | | [removed: [66](#i6d278eb3cca24d478428bd1e8807ef56_229)] [added: [69](#i6d278eb3cca24d478428bd1e8807ef56_229)] | | |

Forward-looking statements can also be identified by the use of forward-looking or conditional words, such as “could,” “should,” “can,” “continue,” “aim,” “estimate,” “forecast,” “intend,” “look,” “may,” “will,” “expect,” “believe,” “anticipate,” “plan,” “remain,” [removed: “confident”] [added: “confident”, “commit”, "potential"] and [removed: “commit”] [added: "trajectory"] or similar expressions.

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 [removed: [27](#i6d278eb3cca24d478428bd1e8807ef56_58)] [added: [28](#i6d278eb3cca24d478428bd1e8807ef56_58)] of this Form 10-K and elsewhere in the Company's filings with the SEC.

For the year ended December 31, [removed: 2022,] [added: 2023,] 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 [removed: [48](#i6d278eb3cca24d478428bd1e8807ef56_169)] [added: [49](#i6d278eb3cca24d478428bd1e8807ef56_169)] of this Form 10-K for additional information.

Of the [removed: 40,275] [added: 41,822] McDonald's restaurants at year-end [removed: 2022,] [added: 2023,] approximately 95% were franchised.

In addition, there is the International Developmental Licensed Markets & Corporate segment, which includes [removed: markets in] [added: the results of] over [removed: 80] [added: 75] countries, as well as Corporate activities.

The [removed: Company’s] [added: Company's] revenues consist of sales by Company-operated restaurants and fees from [added: franchised] restaurants operated by [removed: franchisees.][added: conventional franchisees, developmental licensees and affiliates.]

[removed: These investments,] developed in collaboration with franchisees, are designed to cater to consumer preferences, improve local business performance and increase the value of the McDonald's brand through the development of modernized, more attractive and higher revenue generating restaurants.

McDonald's Corporation [removed: 2022] [added: 2023] Annual Report 3

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, and its *mission* to make delicious feel-good moments [added: easy] for everyone.

The Company is guided by five *core values* that define who [removed: we are] [added: it is] and how [removed: we run our] [added: it runs the] business across the three-legged stool of McDonald’s franchisees, suppliers, and employees:

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

To do this, the Company continues to evaluate and evolve [removed: its] compensation and benefits programs to remain locally relevant and competitive, [removed: while offering] [added: offers] quality training and learning [removed: opportunities,] [added: opportunities] and [removed: continues to uphold a] [added: upholds] high [removed: standard] [added: standards] of health and safety [removed: for employees] [added: to create] and [removed: customers alike.][added: maintain a safe and respectful workplace for its employees.]

You can find more information about the Company's human capital management and related initiatives [removed: in its “Purpose] [added: on the “Our Purpose] & Impact” [removed: report.][added: section of its website, which is updated annually.]

Company employees, which include those in the Company's corporate and other offices as well as in Company-owned and operated restaurants, totaled over 150,000 worldwide as of year-end [removed: 2022,] [added: 2023,] of which approximately 70% 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.

These forward-looking statements involve a number of risks and uncertainties.

These investments,

The Company’s people strategies aim to create an inclusive environment that represents the communities in which we operate.

Our Commitment to Inclusion

At McDonald’s, inclusion is one of our five Core Values, and we strive to integrate our values into our business operations to deliver an inclusive experience for our stakeholders—including employees, franchisees, suppliers, customers and the communities we serve.

Under the leadership of its Board of Directors, the Company adheres to a global diversity, equity, and inclusion ("DEI") strategy which is critical to its success.

Additionally, it includes:

- a recruitment initiative designed to increase the number of franchisees from all backgrounds, including underrepresented groups in the Company’s U.S. and International Operated Markets segments, by reducing upfront equity requirements for eligible franchisee candidates and providing ongoing learning and development; and

McDonald’s focus on fostering safe, inclusive, and respectful workplaces starts at the beginning of each restaurant crew member’s recruitment journey.

In 2022, the Company published its Responsible and Ethical Recruitment Principles outlining its commitment to working toward five global standards that apply to migrant labor recruiting practices across the Company, franchisees, and International Developmental licensees.

Additionally, in 2023, the Company became a member of the Leadership Group for Responsible Recruitment, which is a collaborative effort to drive positive change in how the Company recruits migrant workers, and joined the Human Rights Coalition of Consumer Goods Forum, which is a coalition of the largest consumer goods brands working to end forced labor.

Beginning in the first quarter of 2023, McDonald's excluded results from Argentina and Lebanon in the calculation of comparable sales due to hyperinflation (Venezuela continues to be excluded).

Systemwide sales to loyalty members is comprised of all sales to customers who self-identify as a loyalty member when transacting with both Company-operated and franchised restaurants.

Systemwide sales to loyalty members are measured across approximately 50 markets with loyalty programs globally.

Full year Systemwide sales to loyalty members represents an annual aggregation of quarterly sales to loyalty members active in the last 90 days.

Earnings and cash flow growth rates presented below were impacted in 2023 by charges related to the company's *Accelerating the Arches* growth strategy, including restructuring costs associated with *Accelerating the Organization,* and charges related to the write-off of impaired

software no longer in use.

The Strategy reflects our purpose, values and growth pillars that build on the Company’s competitive advantages.

The Company continues to build relevance with customers through emotional connections and world class creative, which are central to the brand’s “Feel-Good Marketing” approach.

This is exemplified by campaigns that elevate the entire brand and have been scaled around the globe to connect with customers in authentic and relatable ways.

Another way McDonald’s connects with its customers is through personalized value and digital offers available on the McDonald’s mobile app.

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.

Building on its foundational strength with burgers, the Company will continue to evolve and innovate its longest-standing menu item with plans to implement “Best Burger”; a series of operational and formulation changes designed to deliver hotter, juicier, tastier burgers to nearly all markets by 2026.

Further, the Company is focused on continuing to gain share in the rapidly growing chicken category, as the Company continues to aggressively expand its chicken brands.

This includes plans to offer McCrispy in nearly all markets by the end of 2025 and to expand McCrispy into wraps and tenders in several markets.

These planned innovations and new menu offerings reflect the Company’s ability to test and scale quickly to meet evolving customer preferences.

◦Digital: The Company’s digital experience is transforming how customers order, pay and receive their food.

In the U.S., we are piloting “Ready on Arrival”; a digital enhancement that enables crew to begin assembling a customer’s mobile order prior to their arrival at the restaurant to expedite service and elevate customer satisfaction.

The Company plans to deploy this initiative across its top six markets by the end of 2025.

McDonald’s loyalty customers have proven to be highly engaged, and the Company plans to increase its 90-day active users from over 150 million today to 250 million by 2027.

Further, the Company plans to grow its annual Systemwide sales to loyalty members from over $20 billion today to $45 billion by 2027.

top markets).

The Company is scaling this capability, expecting to increase the percentage of delivery business originating from its mobile app to 30% by 2027.

McDonald’s network provides unmatched scale and convenience for customers.

This competitive advantage in drive thru also presents significant opportunities for growth, such as improving the physical layout of the drive thru with additional lanes, creating additional capacity, which improves speed and efficiency and ultimately leads to sales growth and strong returns.

◦Restaurant Development: The Company will continue to accelerate the pace of restaurant openings to attempt to fully capture the increased demand being driven through the MCD growth pillars in many of its largest markets.

Accordingly, the Company will continue to build on its industry-leading development progress by targeting expansion to 50,000 restaurants by the end of 2027, which would make it the fastest period of growth in Company history.

Further, as the Company plans for long term growth and solidifying McDonald’s leadership position, the Company will develop three platforms to build our competitive advantages, cement our place in culture and stay one step ahead of the next generation of digital customers.

Together, our foundation and platforms will extend the Company’s leadership position and unlock new growth opportunities and efficiencies for our business over the long-term.

Our platforms are:

| | | | | | |

| --- | --- | --- | --- | --- | --- |

The Company’s people strategies aim to create an environment grounded in diversity, equity, and inclusion (“DEI”).

Diversity, Equity and Inclusion

The Company's aspiration is that no matter where you are in the world, when you interact with McDonald’s, DEI is 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.

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

- a franchisee recruitment initiative to increase the number of new franchisees from all backgrounds, including underrepresented groups, particularly for those who may face socio-economic barriers to entry;

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

While McDonald’s is proud of its more than 65-year history as an employer, its 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 underrepresented groups, not only within the Company but across the System.

Aligned with the 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.

In addition to the Company’s financial performance, executives are measured on quantitative metrics that include championing the Company's core values, improving representation within leadership roles (Senior Director and above) and assessing feelings of inclusion within the Company.

In addition, in 2022, the Company introduced an owner/operator diversity metric into its incentive plan for certain key officers and managing directors.

Beginning in 2022, the first full year in which the Global Brand Standards were in effect, all restaurants were assessed on the Global Brand Standards in accordance with the applicable McDonald’s market’s business evaluation processes.

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.

In addition, during the last three years, markets experienced varying levels of governmental restrictions on restaurant operations in response to the COVID-19 pandemic, including restrictions related to operating hours, dine-in capacity, and dining room and restaurant closures.

These restrictions affected the Company’s revenues for all three years, with a more limited impact in 2022 due to the lesser extent of the restrictions.

This includes sales from digital channels, which are comprised of the mobile app, delivery and kiosk at both Company-operated and franchised restaurants.

- Comparable sales in the International Developmental Licensed segment increased 16.0%, reflecting positive comparable sales across the segment, led by Japan and Brazil, partly offset by negative comparable sales in China due to continued COVID-19 related government restrictions.

Additionally, 2021 results were impacted by gains on the Company's sale of McDonald's Japan stock, the remeasurement of deferred taxes as a result of a change in the U.K. statutory income tax rate and charges from the sale of McD Tech Labs.

This is exemplified by campaigns that elevate the entire brand, such as the Famous Orders platform that has been repeatedly adopted by markets across the globe, the FIFA World Cup campaign that debuted in 75 markets, the UK’s Raise Your Arches campaign that was picked up by 30 markets around the globe and The Cactus Plant Flea Market Box in the U.S. 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 and is especially important to our customers in uncertain economic environments.

Around the world, McDonald’s possesses 10 of these "billion-dollar brand equities." The Company will continue to improve on its classics by implementing a series of operational and formulation changes designed to deliver hotter, juicer, tastier burgers across the globe.

While leaning into core icons like Chicken McNuggets, ongoing focus will include scaling emerging equities such as the McSpicy and McCrispy Chicken Sandwiches.

In 2022, digital channels (the mobile app, delivery and kiosk) comprised nearly 35% of Systemwide sales in the Company’s top six markets, representing over $25 billion in digital Systemwide sales.

◦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.

As of December 31, 2022, the Company’s loyalty customers have proven to be highly engaged, with nearly 50 million active loyalty members across the top six markets in the last 90 days, including 28 million in the U.S.

This capability is now available in the U.S., the U.K., Canada and Australia.

The Company has also put in place long-term strategic partnerships with UberEats, DoorDash, Just Eat Takeaway.com and Deliveroo.

◦Restaurant Development: The Company will accelerate the pace of restaurant openings with the recent addition of this component to the MCD growth pillars.

The Company believes there is opportunity for further growth in many of its largest markets and to explore new formats under the McDonald’s brand over the coming years.

- Running Great Restaurants: The Company offers the speed, choice and personalization that its customers expect and serves delicious food people feel good about eating, with convenient locations and hours and affordable prices.

- Empowering our People: The Company believes the employee experience is critical to its success and, in 2022, implemented Global Brand Standards which are designed to create a culture of safety for both employees and customers in McDonald’s restaurants around the world.

This work is guided by a commitment to provide people with career paths for growth and development that capitalize on the global nature of the Company's business.

These efforts, coupled with investments in innovation, are designed to enhance the customer experience and deliver long-term profitable growth for all stakeholders.

Impact of COVID-19 Restrictions

During the last three years, markets experienced varying levels of governmental restrictions on restaurant operations in response to the COVID-19 pandemic, including restrictions related to operating hours, dine-in capacity, and dining room and restaurant closures.

These restrictions affected the Company’s revenues for all three years, with a more limited impact in 2022 due to the lesser extent of the restrictions.

As most revenues and the Company's share of net results in equity investments are based on a percent of sales, consumer sentiment and government restrictions as a result of COVID-19 may continue to have an impact on results.

| | | | Item 1C | | | Cybersecurity | | | Page [34](#i6d278eb3cca24d478428bd1e8807ef56_2510) | | |

| | | | Item 2 | | | Properties | | | Page [35](#i6d278eb3cca24d478428bd1e8807ef56_64) | | |

| | | | Item 3 | | | Legal Proceedings | | | Page [35](#i6d278eb3cca24d478428bd1e8807ef56_61) | | |

| | | | Item 5 | | | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | | | Page [27](#i6d278eb3cca24d478428bd1e8807ef56_55) | | |

| | | | Item 7 | | | Management’s Discussion and Analysis of Financial Condition and Results of Operations | | | Page [8](#i6d278eb3cca24d478428bd1e8807ef56_19) | | |

| | | | Item 7A | | | Quantitative and Qualitative Disclosures About Market Risk | | | Page [23](#i6d278eb3cca24d478428bd1e8807ef56_40) | | |

| | | | Item 8 | | | Financial Statements and Supplementary Data | | | Page [37](#i6d278eb3cca24d478428bd1e8807ef56_73) | | |

| | | | Item 9A | | | Controls and Procedures | | | Page [65](#i6d278eb3cca24d478428bd1e8807ef56_217) | | |

| | | | Item 10 | | | Directors, Executive Officers and Corporate Governance | | | Page [36](#i6d278eb3cca24d478428bd1e8807ef56_67), (a) | | |

| | | | Item 12 | | | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | | | Page [65](#i6d278eb3cca24d478428bd1e8807ef56_220), (a) | | |

| | | | Item 15 | | | Exhibits and Financial Statement Schedules | | | Page [66](#i6d278eb3cca24d478428bd1e8807ef56_223) | | |

| Signatures | | | | | | | | | Page [removed: 66] [added: [69](#i6d278eb3cca24d478428bd1e8807ef56_229)] | | |

(a) - The information required by this item is incorporated herein by reference from the Company's definitive proxy statement, which will be filed no later than 120 days after December 31, [removed: 2022.][added: 2023.]

McDonald's Corporation [removed: 2022] [added: 2023] Annual Report [removed: 65][added: 68]

| | | | [removed: *Corporate Executive] [added: *Executive] Vice President and [added: Global] Chief Financial Officer* | | |

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated below on the [removed: 24th] [added: 22nd] day of February, [removed: 2023:][added: 2024:]

| | | | [removed: *Corporate Executive] [added: *Executive] Vice President and [added: Global] Chief Financial Officer* | | | | | | [removed: *President, Chief Executive Officer and Director*] [added: *Senior Vice President - Corporate Controller*] | | |

| | | | [removed: *(Principal Financial Officer)*] | | | | | | *(Principal Executive Officer)* | | |

| *By* | | | /s/ [removed: Catherine Hoovel] [added: Ian F. Borden] | | | [added: *By*] | | | [added: /s/ Catherine Hoovel] | | |

| | | | [removed: Catherine Hoovel] [added: Ian F. Borden] | | | | | | [added: Catherine Hoovel] | | |

| | | | *(Principal [removed: Accounting] [added: Financial] Officer)* | | | | | | [added: *(Principal Accounting Officer)*] | | |

McDonald's Corporation [removed: 2022] [added: 2023] Annual Report [removed: 66][added: 69]

| | | | February 22, 2024 | | |

| *By* | | | /s/ Anthony G. Capuano | | | *By* | | | /s/ Christopher J. Kempczinski | | |

| | | | Anthony G. Capuano | | | | | | Christopher J. Kempczinski | | |

| | | | *Director* | | | | | | *President, Chief Executive Officer and Director* | | |

| *By* | | | /s/ Lloyd H. Dean | | | *By* | | | /s/ Jennifer L. Taubert | | |

| | | | Lloyd H. Dean | | | | | | Jennifer L. Taubert | | |

| | | | February 24, 2023 | | |

| *By* | | | /s/ Ian F. Borden | | | *By* | | | /s/ Christopher J. Kempczinski | | |

| | | | Ian F. Borden | | | | | | Christopher J. Kempczinski | | |

| *By* | | | /s/ Anthony G. Capuano | | | *By* | | | /s/ Richard H. Lenny | | |

| | | | Anthony G. Capuano | | | | | | Richard H. Lenny | | |

| | | | *Director* | | | | | | *Director* | | |

| | | | *Director* | | | | | | *Director* | | |

| *By* | | | /s/ Lloyd H. Dean | | | *By* | | | /s/ John W. Rogers, Jr. | | |

| | | | Lloyd H. Dean | | | | | | John W. Rogers, Jr. | | |

| *By* | | | /s/ Robert A. Eckert | | | *By* | | | /s/ Jennifer L. Taubert | | |

| | | | Robert A. Eckert | | | | | | Jennifer L. Taubert | | |

| | | | *Corporate Senior Vice President - Corporate Controller* | | | | | | | | |