After the news broke this morning about the extension of its master agreement with McDonald’s, Arcos Dorados Holdings Inc. (NYSE: ARCO) shares are seeing a significant rise on the charts. ARCO stock price increased 11.87% as of the latest market check, hitting $9.76.
Arcos Renewed Master Franchise Agreement
Arcos Dorados (ARCO) has announced that it has elected to exercise the option to renew its Master Franchise Agreement (MFA) with the fast food behemoth. In the Renewal Notice that McDonald’s presented to Arcos Dorados on August 1, 2024, a new 20-year agreement was proposed to replace the current MFA, with effect from January 1, 2025.
This week, Arcos Dorados notified McDonald’s of its plan to move forward with the Renewal Option, subject to the renewal requirements outlined in the existing MFA. The sides are currently working out the details of the new accord.
Conditions of the New Contract
It is anticipated that a Renewal Option for a further 20-year period beginning on January 1, 2045, will be included in the next MFA. Additionally, the agreement is expected to stipulate a royalty structure based on Gross Sales, which will be set at 6.0% for the initial ten years, 6.25% for the following five years, and 6.5% for the final five-year period.
Strategic Positioning and Future Outlook
Arcos Dorados has adopted a comprehensive strategy centered on Digital, Delivery, and Drive-thru services, establishing a new benchmark for quality and service within the quick-service restaurant (QSR) sector across Latin America and the Caribbean.
This strategic focus aligns with contemporary consumer expectations for convenience and versatility in dining experiences. The company is committed to leveraging its advanced digital capabilities, operational excellence, and premier menu offerings to satisfy customer demands effectively.
Furthermore, the business model has demonstrated resilience, as evidenced by achieving the second-best EBITDA in U.S. dollars during the second quarter of its operational history. With ambitions for expansion, Arcos Dorados (ARCO) plans to open approximately 90 to 100 new restaurants in 2025, capitalizing on the significant growth opportunities available across its 20 countries and territories.
