Arcos Dorados Holdings Inc. (ARCO): Business Model Canvas [Dec-2025 Updated]

You're looking for the real engine behind the largest independent operator of a certain global burger chain in Latin America, and honestly, the numbers from late 2025 tell a compelling story. After securing a 20-year Master Franchise Agreement renewal starting this year, the company is clearly doubling down on its digital future, with 61% of its Q3 systemwide sales now coming through mobile apps, delivery, and kiosks across its 2,400 locations. We've broken down exactly how this operation-which employs over 100,000 people-balances high royalty fees (6.0% of gross sales) against massive digital adoption and a 70% conversion rate to the modern Experience of the Future format, so dive into the full Business Model Canvas below to see the precise mechanics of their revenue and cost structure.

Arcos Dorados Holdings Inc. (ARCO) - Canvas Business Model: Key Partnerships

You're looking at the core relationships that keep Arcos Dorados Holdings Inc. running across Latin America and the Caribbean. These aren't just vendors; they are foundational to the entire operation.

The most critical partnership, by far, is with McDonald's Corporation. You know they just locked this down. Arcos Dorados finalized a new, 20-year Master Franchise Agreement (MFA) that kicked off on January 1, 2025, replacing the old one. This deal secures their exclusive right to operate and franchise in 20 countries until 2045, with an option for another 20 years after that. This long-term certainty is huge for planning capital expenditures, like the expected 90 to 100 new restaurant openings planned for 2025.

The financial terms of this new MFA are structured with escalating royalty fees based on gross sales. Here's the quick math on that structure:

When you look at the restaurant footprint, Arcos Dorados Holdings Inc. keeps the majority of locations under its direct control. Restaurants operated by Arcos Dorados Holdings Inc. itself account for approximately 75 percent of the total affiliated locations. The remaining portion is handled by Sub-Franchisees, which operate roughly 25% of the affiliated restaurant locations. As of late 2024, the total network across the company and its sub-franchisees was nearly 2,400 restaurants.

For Strategic Suppliers, the relationship goes beyond just commodity purchasing; it involves strategic alignment. For instance, Arcos Dorados Holdings Inc. has been involved in a significant collaborative process with partners like MBRF (ex-Marfrig), WWF-Brasil, and Embrapa. This points to a focus on securing supply chains that meet modern standards.

The digital push requires strong Technology/Delivery Providers. You see this reflected in their integration with Google Cloud to use artificial intelligence for things like optimizing staffing and menu recommendations. This tech focus is paying off in sales mix; as of Q2 2024, sales through digital channels hit 57% of total sales, with Brazil leading at 67% penetration in that market. Also, their loyalty program is a key digital asset, surpassing 11 million members in less than a year as of late 2024.

The commitment to sustainability is formalized through Sustainability Collaborators. At the November 2025 COP30 event, Arcos Dorados Holdings Inc. participated in a culmination of a year-long effort with partners to drive sustainable agriculture in the region. That process involved 87 leaders and 46 organizations working toward concrete goals.

These sustainability efforts focus on key areas, which you should track:

• Sustainable Cattle Ranching: Balancing productivity and conservation.
• Complete Traceability in Latin America.
• Agriculture free of deforestation and conversion.

The relationship with Formula 1 also highlights a strategic marketing and operational alignment, where the commitment to speed and teamwork is visible from the kitchen to the race pits.

Finance: draft the cash flow impact of the new MFA royalty structure by next Tuesday.

Arcos Dorados Holdings Inc. (ARCO) - Canvas Business Model: Key Activities

You're looking at the core engine of Arcos Dorados Holdings Inc., the activities that translate their franchise agreement into revenue across Latin America and the Caribbean. It's about execution, day in and day out, across a massive footprint.

Restaurant Operations: Arcos Dorados Holdings Inc. is focused on running great, modern restaurants. As of September 30, 2025, the company operated or franchised almost 2,500 restaurants across the 21 countries and territories where it holds the exclusive right to operate McDonald's. This scale is immense; as of June 30, 2025, they employed over 100 thousand people across this network.

Here's a snapshot of the operational scale and performance metrics from the third quarter of 2025:

Digital Transformation: Executing the Three D's-Drive-thru, Delivery, and Digital-is central to their strategy for sustainable growth. The adoption is strong; in the third quarter of 2025, digital channels, which include the Mobile App, Delivery, and Self-order Kiosks, accounted for 61% of systemwide sales. Digital channel sales specifically rose 11.2% year-over-year in U.S. dollars for that quarter. The loyalty program is a key part of this, reaching 23.6 million members by the end of Q3 2025, representing nearly 50% growth in membership.

The digital focus includes:

• Drive-thru optimization for speed and convenience.
• Expanding Delivery partnerships and in-house capabilities.
• Increasing digital sales penetration across all channels.
• Growing the Loyalty Program coverage, which was on target to reach 90% of all restaurants by the end of 2025.

Menu Innovation: Arcos Dorados Holdings Inc. must balance the global brand standards with local consumer demand and affordability platforms. The systemwide comparable sales growth of 12.7% in Q3 2025 was in-line with the blended inflation rate for the period, suggesting successful pricing power and menu adaptation. This growth was primarily driven by average check increases, which more than offset a low single-digit decline in guest traffic in Q3 2025.

New Unit Development: Opening new, modernized restaurants is a core activity to capture growth. Arcos Dorados Holdings Inc. opened 22 new restaurants across the region during the third quarter of 2025, with 19 of those being free-standing locations. This pace aligns with the full-year 2025 guidance, which management reiterated to be between 90 to 100 new restaurant openings. As of the end of September 2025, 72% of the total restaurant portfolio was modernized.

Supply Chain Management: Managing logistics and sourcing food across the diverse Latin American footprint presents constant challenges. In Q3 2025, food & paper costs remained above prior-year levels, putting pressure on margins. For instance, beef costs in Brazil specifically saw a significant increase of approximately 35% year-over-year in the context of Q3 2025 results. The company is actively pursuing operational efficiencies to offset these input cost pressures.

Finance: review the Q3 2025 cash flow statement against the $179.9 million in total property and equipment expenditures for the nine months ended September 30, 2025.

Arcos Dorados Holdings Inc. (ARCO) - Canvas Business Model: Key Resources

You're looking at the core assets Arcos Dorados Holdings Inc. relies on to run its massive operation across Latin America and the Caribbean. These aren't just line items; they are the exclusive licenses, the physical footprint, and the human engine driving the business.

Master Franchise Rights: Arcos Dorados Holdings Inc. holds the exclusive right to own, operate, and grant franchises of McDonald's restaurants in 21 Latin American countries and territories. This exclusivity is foundational, securing their position as the largest independent franchisee in the region. This agreement, with a new 20-year term set to take effect on January 1, 2025, is a critical intangible asset.

Real Estate: The company manages a substantial portfolio of owned and leased restaurant properties. As of the third quarter of 2025, the footprint included 2,479 restaurants across its operating territories. The structure of this real estate, a mix of owned land and long-term leases, is a key component of its asset base.

Human Capital: The operational scale requires a massive workforce. Arcos Dorados Holdings Inc. employed over 100,000 people as of June 30, 2025. This large team supports both company-operated and sub-franchised locations. A specific data point from 2023 showed 100.8K employees.

The physical and digital scale of Arcos Dorados Holdings Inc. as of late 2025 can be summarized like this:

Digital Ecosystem: Investment in technology translates directly into resource value. The mobile app and Loyalty Program are significant drivers, reaching 23.6 million registered members by the end of the third quarter of 2025. This program is now available in 7 countries, with plans to be offered in about 90% of all restaurants by the end of 2025. Digital channels accounted for 61% of system-wide sales in Q3 2025.

Modernized Restaurants: The physical upgrade program is a key operational asset. As of the third quarter of 2025, 72% of the company's restaurant portfolio had been converted to the Experience of the Future (EOTF) format. This modernization supports the omnichannel strategy, particularly in driving sales through self-order kiosks.

You should note the growth in the restaurant base; the company opened 54 restaurants through the first three quarters of 2025.

• Exclusive Franchise Territory: 21 Countries/Territories.
• Total Employees: Over 100,000 (as of mid-2025).
• Loyalty Program Reach: 23.6 million members (Q3 2025).
• Modernization Level: 72% of portfolio.

Finance: draft 13-week cash view by Friday.

Arcos Dorados Holdings Inc. (ARCO) - Canvas Business Model: Value Propositions

You're looking at the core reasons why customers choose Arcos Dorados Holdings Inc. across Latin America and the Caribbean, especially as they push hard on digital adoption through late 2025.

Speed and Convenience: QSR leader in Latin America and the Caribbean

Arcos Dorados Holdings Inc. solidifies its value proposition by being the world's largest independent McDonald's franchisee, which means they operate the largest quick service restaurant chain across the entire region. As of the third quarter of 2025, the company managed a footprint of exactly 2,479 restaurants across 21 countries and territories. This scale is a direct value proposition for convenience, ensuring a familiar experience is always nearby.

Digital Omnichannel Experience: Seamless ordering via app, kiosk, drive-thru, and delivery

The digital push is clearly a major value driver. In the third quarter of 2025, the company reported that digital channels-which include the Mobile App, Delivery, and Self-order Kiosks-accounted for a commanding 61% of all systemwide sales. This digital sales contribution grew by 11.2% year-over-year in U.S. dollars for that quarter alone. Furthermore, the loyalty program is a key part of this ecosystem, having expanded to reach over 23.6 million registered members by the end of Q3 2025, active in more than 70% of their locations.

Here's a quick look at how the digital focus has ramped up:

• Digital channels share of systemwide sales (Q3 2025): 61%.
• Loyalty Program members (Q3 2025 end): 23.6 million.
• New restaurants opened in Q3 2025: 22.
• Systemwide comparable sales growth (Q3 2025): 12.7%.

To be fair, this digital momentum has been building; in Q2 2025, digital channels already contributed more than 60% of systemwide sales.

Affordability and Value: Targeted pricing platforms for value-conscious consumers

Arcos Dorados Holdings Inc. manages value by ensuring its pricing keeps pace with the challenging macro environment. Systemwide comparable sales growth in Q3 2025 hit 12.7%, which management noted was in-line with the blended inflation rate for the period. This suggests successful pricing strategies are being deployed to maintain margins while keeping the offering accessible. For instance, in Brazil, the focus was explicitly on pricing above inflation to counteract severe input cost pressures, such as beef costs which were up 35% year-over-year.

Consistent Global Brand: Reliable quality and familiar menu items

The value proposition rests heavily on the reliability of the global brand they represent. With 2,479 restaurants across 21 countries as of late 2025, the brand offers a standardized, reliable experience. The company continues to invest in its physical presence, having opened 22 new restaurants in the third quarter of 2025 alone, reinforcing accessibility and modernization across its vast territory.

Social Impact: Providing first formal job opportunities for young people

Arcos Dorados Holdings Inc. positions itself as a significant engine for youth development in the region. The company employs over 100,000 young people across Latin America and the Caribbean, effectively serving as a major source of first formal job opportunities. New hires reportedly receive 30 hours of structured training. Annually, with approximately 68,000 people starting their employment journeys, this translates to more than two million training hours delivered across the system each year.

Finance: draft 13-week cash view by Friday.

Arcos Dorados Holdings Inc. (ARCO) - Canvas Business Model: Customer Relationships

You're focused on how Arcos Dorados Holdings Inc. (ARCO) keeps customers coming back and spending more in a region with constant economic shifts. Their approach to customer relationships is heavily weighted toward digital engagement, which is now driving the majority of their business.

Loyalty Program: Digital engagement to drive visit frequency and higher average check.

The loyalty program is central to driving repeat business. Members of the program historically make between 1.5 and 2 times more purchases than non-members, which directly translates to higher visit frequency and a larger average check for that segment. By the third quarter of 2025, the program was active in over 70% of Arcos Dorados Holdings Inc. restaurants and is on track to be fully rolled out across all major markets by the end of 2025.

Personalized Offers: Mobile app-based marketing to 23.6 million members.

The scale of their personalized marketing is significant. As of the third quarter of 2025, the mobile app-based loyalty program reached more than 23.6 million registered members. This represents a nearly 50% surge in membership compared to the prior year, showing rapid adoption of their digital-first approach. This large base allows for highly targeted offers that help drive sales even when macro conditions are tough.

Here's a quick look at the digital engagement metrics as of the latest reported period:

Self-Service: High-tech interaction via self-order kiosks in EOTF restaurants.

Arcos Dorados Holdings Inc. is embedding high-tech interaction directly into the ordering process through self-order kiosks, primarily within its Experience of the Future (EOTF) format restaurants. As of Q1 2025, 68% of the company's portfolio was in this modernized EOTF format, which heavily features these kiosks. The shift to digital channels, which includes kiosks, is clearly working, as 61% of systemwide sales flowed through these methods in Q3 2025. For the broader industry, using kiosks can lead to order processing times dropping by up to 40% and can boost the average ticket size by 8% to 15%, depending on the menu type, by prompting upsells.

Customer Service Culture: Cooltura de Servicio focused on enhancing guest satisfaction.

The operational focus is codified in the company's core values, which include a commitment to Quality, Service, and Cleanliness. This cultural drive, which they refer to internally as Cooltura de Servicio, is meant to translate into tangible guest satisfaction. The company states it provides the highest standards of quality, food safety, and hygiene across its operations. The goal here is to ensure that the efficiency gained from digital tools doesn't come at the expense of the guest experience. You can see this commitment reflected in their operational priorities:

• Delivering the highest standards of quality.
• Maintaining food safety and hygiene protocols.
• Strengthening the bond with guests digitally.
• Achieving robust market share gains in many markets.

Finance: review the Q4 2025 projected impact of loyalty program penetration on average check size by market by next Tuesday.

Arcos Dorados Holdings Inc. (ARCO) - Canvas Business Model: Channels

You're looking at how Arcos Dorados Holdings Inc. gets its product to the customer across Latin America and the Caribbean as of late 2025. It's a multi-pronged approach, balancing traditional brick-and-mortar presence with a massive digital push. Honestly, the numbers show where the focus is right now.

The core physical footprint is still largely under direct control. Arcos Dorados owns, manages and operates approximately 75% of its restaurant locations. This means the majority of sales flow directly through company-operated restaurants, giving Arcos Dorados direct control over the guest experience and pricing at those units. The remaining locations are run by third-party operators.

The real story in the Channels block is the digital acceleration. For the third quarter of 2025, digital channels-which include the Mobile app, Delivery, and Self-order Kiosks-generated a massive 61% of total systemwide sales. This digital sales mix climbed 11.2% year-over-year in U.S. dollars for that quarter, showing this isn't just a trend but the primary transaction method for many guests. This strategy is key to maintaining market share in a volatile region.

The physical channels are being modernized to support this omnichannel strategy. Drive-Thru remains a key physical channel for sales acceleration, which is why the company opened 22 new restaurants in Q3 2025, with a focus on free-standing locations designed to maximize Drive-Thru throughput. At the end of Q3 2025, the total restaurant count stood at 2,479 units across the region.

Integration with third-party delivery services is inherent in the Digital Channels metric, but the internal loyalty program is also a major channel driver. By the end of Q3 2025, the Loyalty Program reached 23.6 million registered members, active in over 70% of the restaurant footprint. This program helps drive frequency across all sales channels.

Here's a quick look at the scale and mix of the Channels as of the end of Q3 2025:

The structure of the physical and digital interaction points is critical to Arcos Dorados Holdings Inc.'s performance:

• Company-Operated Restaurants generate direct sales revenue.
• Sub-Franchised Restaurants contribute revenue via rental income/royalties.
• Digital Channels include Mobile App, Delivery, and Self-order Kiosks.
• Loyalty Program membership reached 23.6 million members by Q3 2025 end.
• Systemwide Comparable Sales grew 12.7% in Q3 2025, in-line with blended inflation.

The focus on Experience of the Future (EOTF) restaurants is a channel investment, with 22 new units opened in the quarter to support these modern service models. If onboarding takes 14+ days, churn risk rises, but here the focus is on physical upgrades supporting digital ordering.

Arcos Dorados Holdings Inc. (ARCO) - Canvas Business Model: Customer Segments

You're looking at the core groups Arcos Dorados Holdings Inc. serves across its vast Latin American and Caribbean footprint. This isn't a single market play; it's about tailoring the experience across wildly different economic realities, from stable economies to those battling high inflation.

Mass Market Consumers

Arcos Dorados Holdings Inc. targets the broad consumer base that makes up the quick-service restaurant (QSR) landscape in the region. This is supported by an unmatched geographic scale. The company holds the exclusive right to own, operate, and franchise McDonald's restaurants across 21 Latin American and Caribbean countries and territories as of mid-2025. This massive footprint means the core customer is anyone seeking a consistent, recognized brand experience across this diverse geography.

The sheer scale of operations means they serve a huge volume of people daily. For instance, in the third quarter of 2025, the company reported total revenues of $1.2 billion.

Families

The family segment is definitely a core focus, built on the brand's heritage as a family business. Management explicitly noted that the family segment deepened its emotional connection with guests during the third quarter of 2025 through specific marketing efforts. This focus is often tied to specific product offerings and promotions.

Key elements driving engagement with this segment include:

• Targeted product tie-ins using popular licenses like Hello Kitty and Tiny TAN.
• Dessert sales boosted by localized McFlurry flavors and popular licenses.
• The overall brand promise of creating memorable experiences.

Digital Users

Tech-savvy consumers are now central to the Arcos Dorados Holdings Inc. strategy, driving significant sales volume through its omnichannel approach. The investment in digital capabilities is paying off handsomely. In the third quarter of 2025, a massive 61% of systemwide sales flowed through digital channels, which include the mobile app, delivery platforms, and self-order kiosks. This represents an 11.2% year-over-year climb in digital sales in U.S. dollars for that quarter.

The loyalty program is the engine for this segment, designed to increase visit frequency and customer retention. By the end of the third quarter of 2025, the program had grown to over 23.6 million registered members, which is nearly a 50% surge from the end of 2024. Furthermore, the program was active in over 70% of all restaurants, on target to reach all main markets by the end of 2025.

Here's a quick look at the digital penetration metrics as of late 2025:

Value Seekers

Navigating the region's economic volatility, especially in high-inflation markets, makes the Value Seeker segment critical. Arcos Dorados Holdings Inc. keeps its affordability platforms as a strategic priority to offer good value for money to guests. This is evidenced by strong performance in markets with significant local inflation challenges.

For example, in the third quarter of 2025, systemwide comparable sales growth in Argentina was 1.3x local inflation, and in Mexico, it was 1.8x local inflation, showing the ability to adjust pricing while maintaining sales momentum. The company also leveraged platforms like the McCrispy Chicken to introduce new sandwiches and bundles, catering to price-conscious yet quality-seeking consumers.

Arcos Dorados Holdings Inc. (ARCO) - Canvas Business Model: Cost Structure

You're looking at the core expenses that drive the operational engine for Arcos Dorados Holdings Inc. as of late 2025. These are the major drains on revenue that management must control to deliver returns across their 21 Latin American and Caribbean markets.

Key Cost Components

The cost structure is heavily influenced by franchise obligations, commodity volatility, and the sheer scale of the workforce required to run nearly 2,500 restaurants.

• Royalty Fees: Payment of 6.0% of gross sales to McDonald's Corporation (2025 MFA rate).
• Cost of Goods Sold (COGS): Significant expense, impacted by commodity costs like 35% higher beef in Q3 2025.
• Payroll and Labor Costs: Wages for over 100,000 employees.
• Occupancy Costs: Rent and operating expenses for restaurant locations.
• Capital Expenditures: Property and equipment expenditures of $179.9 million for the first nine months of 2025.

Royalty Fees and Franchise Obligations

The Master Franchise Agreement (MFA) renewal, effective January 1, 2025, locks in a specific cost. This rate is a direct percentage of top-line sales, meaning it is incurred regardless of profitability. For the first ten years, the rate is set at 6.0% of gross sales.

Here's how that royalty fee relates to recent revenue performance:

The new rate is slightly lower than the 7% Arcos Dorados had primarily paid under the previous agreement, which management noted helped offset margin pressure.

Cost of Goods Sold (COGS) and Input Pressure

Food and paper costs are a massive component of the overall cost base. In the third quarter of 2025, this category was a primary driver of margin pressure, even as the company achieved operational efficiencies elsewhere. Specifically, Arcos Dorados management pointed to 35% higher beef costs impacting the Adjusted EBITDA performance year-over-year, excluding a significant tax credit.

The company is actively managing this through pricing strategies, as seen by systemwide comparable sales growth of 12.7% in Q3 2025, which was in-line with blended inflation for the period.

Payroll and Labor Costs

Labor is inherently high in the Quick Service Restaurant sector, and Arcos Dorados is one of the region's largest employers. As of June 30, 2025, the company employed over 100,000 individuals across its operations. Management has focused on driving productivity within this large base, citing 'Increased payroll productivity' as a positive factor that helped expand the Adjusted EBITDA margin.

Occupancy Costs

This category covers rent and operating expenses for the restaurant locations. Like labor, these costs are substantial due to the large physical footprint. For the third quarter of 2025, franchised restaurants' occupancy expenses were reported at $22,619 thousand (or $22.62 million).

Still, the company achieved 'leverage in occupancy and other operating expenses,' which contributed positively to the Adjusted EBITDA margin comparison against the prior year.

Capital Expenditures (CapEx)

Arcos Dorados is in an investment cycle, modernizing its restaurants to the Experience of the Future (EOTF) format and expanding the footprint. This heavy investment is a significant cash outflow. For the nine-month period ended September 30, 2025, total property and equipment expenditures totaled $179.9 million.

The company is on track to deliver its full-year guidance for new restaurant openings, with more than half of the CapEx for the third quarter invested in these new locations. The full-year 2025 Capital Expenditures guidance is projected to be between $300 million and $350 million.

Arcos Dorados Holdings Inc. (ARCO) - Canvas Business Model: Revenue Streams

You're looking at the top-line drivers for Arcos Dorados Holdings Inc. as of late 2025. The revenue streams are heavily weighted toward direct restaurant sales, but the digital shift is clearly the most dynamic part of the business right now.

Sales from Company-Operated Restaurants form the core of the revenue base. For the third quarter of 2025, total company revenues hit $1.2 billion. To put that volume in context, Arcos Dorados Holdings Inc. ended the quarter operating 2,479 locations across its footprint. Systemwide Comparable Sales, which gives you a cleaner look at existing store performance, grew 12.7% versus the prior year in that same quarter.

Here's a quick look at the key financial results from that period:

Rental Income from Sub-Franchisees is the second component, though we don't have a specific dollar figure for Q3 2025. This stream comes from franchised locations, typically structured as a fixed fee or a percentage of sales paid back to Arcos Dorados Holdings Inc. as the master franchisee.

Digital Sales are definitely the major growth driver you need to watch. Revenue generated through the Mobile App, Delivery services, and Self-order Kiosks rose 11.2% year-over-year in US dollars for the third quarter. More importantly, this channel contributed 61% of all systemwide sales in the quarter. That's more than half the business flowing through digital touchpoints.

Net Income for the quarter was reported at $150.4 million. Honestly, you can't look at that number without noting the significant one-time item: the result included a $125.2 million net benefit from a federal tax credit in Brazil related to prior periods (2016-2023).

Here are some other key operational statistics that feed into these revenue numbers:

• Systemwide Comparable Sales growth was 12.7% in Q3 2025.
• The Loyalty Program reached more than 70% of all restaurants by the end of Q3 2025.
• The Company opened 22 restaurants across the region in the third quarter of 2025.
• Net Debt to Adjusted EBITDA leverage ratio was a comfortable 1.2x as of September 30, 2025.

Finance: draft a sensitivity analysis on the impact of a 5% drop in digital sales contribution by next week.