⚠ Real-Estate-Backed Leverage Adds RiskModerate threat

The real estate that backs McDonald's balance sheet also enables the leverage that is one of the company's few genuine financial risks. McDonald's has borrowed heavily against its stable cash flows and valuable property to fund years of share buybacks — a strategy that has boosted per-share earnings and returns, and even carried the company to negative book equity, but that leaves it with a substantial debt load and real interest-rate exposure. Management expects interest expense to rise 4–6% in 2026¹, and in a higher-for-longer rate environment, or a period of weak sales, the leverage amplifies risk and consumes more cash in interest.

The asset backing makes the debt well-covered and the strategy defensible — this is not a fragile balance sheet, and the real estate provides genuine downside protection — but leverage is leverage, and it means McDonald's shareholder returns are magnified by financial risk rather than resting on the operating business alone. A severe, prolonged downturn in sales, combined with elevated rates, would pressure the company more than an unlevered peer. The real-estate-backed leverage is a deliberate, well-managed choice that has served shareholders well, but it is a source of risk that comes bundled with the balance-sheet strength, and one more reason to watch the interplay of rates, sales, and the debt load in the years ahead.