McDonald’s Corporation MCD has reinforced its presence in Latin America by renewing the company’s Master Franchise Agreement with Arcos Dorados Holdings Inc. ARCO, the region’s largest restaurant chain and the world’s largest independent franchisee of the brand. The agreement, signed on Dec. 30, 2024, highlights McDonald’s confidence in its longstanding partnership with Arcos Dorados.

The new 20-year MFA, effective Jan. 1, 2025, replaces the prior agreement and ensures the continuity of operations across key markets in Latin America and the Caribbean. Notably, this agreement includes a renewal option, giving McDonald’s the discretion to extend the partnership for an additional 20 years starting Jan. 1, 2045. This move underlines McDonald’s strategic commitment to its growth and market leadership in the region.

The financial terms of the MFA establish a tiered royalty structure. For the first 10 years, Arcos Dorados will remit 6% of gross sales to McDonald’s. The rate increases to 6.25% for the subsequent five years and further to 6.5% for the final five years. This progressive model aligns incentives and indicates confidence in the potential for revenue growth in these markets.

Woods Staton, executive chairman of Arcos Dorados, expressed pride in the franchise’s achievements and reaffirmed its commitment to enhancing shareholder value while making a positive community impact. This aligns closely with McDonald’s global focus on operational excellence and community engagement.

McDonald’s benefits significantly from this agreement, as Arcos Dorados has consistently proven itself as a premier operator in challenging and diverse markets. The extension strengthens McDonald’s footprint in Latin America, leveraging Arcos Dorados’ deep local expertise to maintain leadership in a region with immense growth potential.

This renewal marks a milestone in McDonald’s global strategy, demonstrating the power of strong partnerships in driving long-term success.

MCD Stock’s Price Performance

In the past six months, shares of the company have gained 17% compared with the industry’s rise of 10.8%.

The company is benefiting from technological enhancements, unit expansion and a loyalty program. McDonald’s is focusing on menu innovation, as it believes that the strengthening of the core menu and solid marketing are likely to pave the way for additional growth in the upcoming periods. Also, the emphasis on the Accelerating the Arches strategy bodes well.

MCD currently has a Zacks Rank #3 (Hold).