Arcos Dorados Renews Franchise Agreement With McDonald's, Stock Gains

Arcos Dorados Holdings Inc. ARCO saw its shares rise on Thursday following the announcement of a renewed Master Franchise Agreement with McDonald’s Corporation MCD.

The new 20-year MFA, effective January 1, replaces the previous agreement and includes an option for renewal at McDonald’s discretion for another 20 years, beginning January 1, 2045.

The updated agreement includes a royalty fee structure based on gross sales: 6.0% for the first ten years, 6.25% for the next five years, and 6.5% for the final five years. This renewal reflects the long-standing partnership between the two companies.

Woods Staton, Executive Chairman of Arcos Dorados, expressed pride in the company’s role as McDonald’s primary franchisee in Latin America and the Caribbean, emphasizing the positive impact the company has had on the communities it serves.

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“Over the next 20 years, we will work even harder to consolidate our market leadership in all aspects of our business for the benefit of all our stakeholders,” he concluded.

Arcos Dorados will provide additional details on the new deal in accordance with US Securities and Exchange Commission requirements.

“In line with McDonald’s global growth strategy, we expect our restaurant opening pipeline to unlock even more shareholder value, as we capture the significant expansion opportunity over the next several years,” said  Marcelo Rabach, Chief Executive Officer in a press release dated November 13, 2024.

According to the company’s proprietary research, McDonald’s brand gained five points of value share across its operating footprint in the third quarter compared with the prior year period.

Price Action: ARCO shares are trading higher by 3.98% to $7.57 premarket at last check Thursday.

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