Arcos Dorados Targets 600 Openings, Higher Cash Flow in Long-Term Growth Plan

Key Points

• Arcos Dorados plans significant expansion, targeting 550–600 new restaurants from 2027 through 2030 after 105–115 openings in 2026, with $1.3 billion–$1.5 billion in planned capital expenditures.
• Management expects average revenue growth in the mid- to high-single digits and adjusted EBITDA growth in the high-single- to low-double-digit range, supported by new restaurants, margin gains and higher-return investments.
• The company is emphasizing stronger cash generation and efficiency: adjusted free cash flow recovered to $143 million, while smaller restaurant formats and digital site-selection tools are expected to reduce average investment per opening by 15%–20% versus 2024 and improve initial returns.

Arcos Dorados NYSE: ARCO, the largest McDonald’s restaurant operator in Latin America and the Caribbean, used its 2026 Investor Day to outline a multiyear growth plan centered on restaurant development, digital capabilities, margin improvement and free-cash-flow generation.

CEO Luis Raganato said the company’s primary goal is to create shareholder value through more resilient financial performance, stronger returns on investment and sustainable cash generation. The company operates more than 2,500 restaurants across 21 markets and plans to build on its restaurant operations, brand position and regional digital platform.

Long-Term Development and Financial Targets

Arcos Dorados reaffirmed its 2026 expectation for 105 to 115 restaurant openings and total capital expenditures of $275 million to $325 million. For 2027 through 2030, the company set an ambition for 550 to 600 cumulative restaurant openings, supported by total capital expenditures of $1.3 billion to $1.5 billion.

Raganato said the company intends to increase annual restaurant openings without materially increasing average total capital expenditures, while prioritizing higher-return investments. The company said the targets may be adjusted depending on market conditions.

The company also introduced a long-term growth framework, describing it as an average trend rather than guidance for any individual year:

• Total revenue growth in the mid- to high-single-digit range, supported by comparable-sales growth and new openings.
• Adjusted EBITDA growth in the high-single- to low-double-digit range, supported by revenue growth and additional margin gains.

Executive Chairman Woods Staton said the business has entered what management views as a new phase of profitable growth. He cited McDonald’s market-share strength across all 21 markets, a modern restaurant portfolio, digital capabilities and what he described as an experienced regional management team.

Growth Since 2021 and Cash-Flow Focus

CFO Mariano Tannenbaum said net revenue rose from $2.7 billion in 2021 to $4.7 billion in 2025, representing 76% growth and a compounded annual growth rate above 15%. He said sales per restaurant increased 60% and traffic per restaurant rose more than 30% during the period.

Adjusted EBITDA more than doubled to $575 million in 2025 from $272 million in 2021, although Tannenbaum noted that 2025 included a significant tax credit in Brazil. He said adjusted EBITDA margin expanded by about two percentage points, while labor and general-and-administrative costs declined as a percentage of sales over the longer term.

The company’s adjusted free cash flow recovered to $143 million over the last 12 months after its investment cycle peaked, according to Tannenbaum. He said the most intensive phase of restaurant modernization is now behind the company, creating a stronger base for future cash generation.

Arcos Dorados reported that its net-debt-to-EBITDA ratio has remained between 1.0x and 1.2x in recent years. The company said it holds investment-grade ratings from Fitch and S&P and believes its balance sheet provides flexibility to fund expansion without materially increasing leverage.

Management said capital allocation priorities remain growth investments and dividends, while other alternatives, including share repurchases, could be considered as free cash flow develops.

Restaurant Pipeline and Lower Investment Per Unit

VP of Development Sebastián Magnasco said the company opened 102 restaurants in 10 markets during 2025 and had opened 60 restaurants through the end of September 2026. He said openings are historically weighted toward the fourth quarter.

Management said approximately 60% of expansion is expected to be directed to Brazil, followed by Mexico, Argentina and Chile, with Colombia emerging as an additional opportunity.

Magnasco said the company has mapped more than 1,800 potential sites and sees more than 6,000 long-term opportunities in Brazil, Mexico, Argentina and Chile when benchmarked against restaurant density in Costa Rica and Panama. He emphasized that the figure is not guidance or a development calendar.

The company is using artificial intelligence and digital tools for site selection, demand forecasts, business-case approvals and restaurant design. Arcos Dorados expects the average freestanding restaurant footprint to decline to 280 square meters for 2026 openings, from 350 square meters in 2024.

As a result, Magnasco said average investment per restaurant in 2026 is projected to be 15% to 20% lower than in 2024, while first-year returns on investment are expected to improve by three to five percentage points. The company historically targets approximately 20% first-year cash-on-cash returns on an aggregate basis, he said.

Digital, Menu and Supply-Chain Initiatives

Chief Marketing and Digital Officer Santiago Blanco said digital channels now account for 65% of systemwide sales, while close to one-third of sales are identified through customer data. The company’s loyalty program has more than 36 million members, and its mobile app has surpassed 200 million downloads and supports more than 200 million annual transactions.

Chief Innovation and Technology Officer Magdalena Gonzalez Victorica said the app generates nearly 30% of sales and serves as the company’s platform for loyalty, e-commerce, mobile order-and-pay and delivery. She said AI-driven cross-selling recommendations produce tickets approximately 30% higher than orders without cross-selling.

Arcos Dorados also said it has begun testing voice ordering in Argentina in English, Spanish and Portuguese. Gonzalez Victorica said the company will evaluate the pilot before expanding it to other markets.

On menu strategy, management identified chicken and crafted beverages as growth opportunities. Chicken currently represents about 20% of protein sales, and Raganato said the company’s ambition is to increase its share of sales to roughly 25% over time. The company said chicken offers attractive margin potential relative to beef, while beverages can create new customer occasions and appeal to younger consumers.

Supply-chain chief Philippe de Grivel said the company manages approximately $2.6 billion in spending and sources 85% of products and services locally or regionally. He said Arcos Dorados is focused on managing beef-cost volatility, improving demand planning, automating replenishment and reducing distribution costs to support margins, availability and working-capital efficiency.

About Arcos Dorados (NYSE:ARCO)

Arcos Dorados Holdings Inc is the largest independent McDonald's franchisee in the world and the exclusive master franchisee for McDonald's in Latin America and the Caribbean. The company operates and franchises McDonald's restaurants across 20 countries and territories, serving customers through company-operated and franchised locations.

Its restaurant business offers McDonald's products including hamburgers, chicken sandwiches, French fries, breakfast items, desserts, soft drinks and McCafé beverages.

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