Arcos Dorados (NYSE:ARCO) executives said the company closed 2025 with “a solid finish” in the fourth quarter, citing double-digit revenue growth, expanding margins, and higher adjusted EBITDA despite ongoing cost and consumer pressures in certain markets. Speaking on the company’s fourth-quarter and full-year 2025 earnings webcast, CEO Luis Raganato pointed to improving trends exiting the year—particularly in Brazil—alongside continued momentum in Mexico and the South Latin America Division (SLAD).
Fourth-quarter results: revenue up 10.7%, adjusted EBITDA up 17.2%
For the fourth quarter, Arcos Dorados reported total revenue of $1.3 billion, an increase of 10.7%. Raganato said revenue growth was supported by 16% higher system-wide comparable sales, which he described as in line with the blended inflation across the company’s 21 markets. Comparable sales growth was driven primarily by average check, which management attributed to “disciplined pricing,” promotional execution, and the strength of digital and loyalty platforms. Guest traffic trends were described as generally stable versus the third quarter.
Full-year 2025: record adjusted EBITDA, tax credit benefit highlighted
For the full year, management said system-wide comparable sales growth was in line with the company’s blended inflation rate, with particularly strong performance in Mexico, Argentina, and several SLAD markets. Revenue for 2025 increased by almost 5% in U.S. dollars, and Tannenbaum said full-year adjusted EBITDA was the highest in the company’s history, helped by net tax benefits recognized in Brazil.
Tannenbaum detailed a Brazil-related net tax benefit that the company recognized in 2025. In the fourth quarter alone, Arcos Dorados recorded a benefit of $20.5 million (mainly as other operating income) and $13.3 million of interest income “below the line.” For the full year, he said adjusted EBITDA included $106.1 million and interest income included $52.9 million from the benefit, for a total impact of $159 million in 2025. The company has begun applying the credit to tax liabilities in 2026 and expects to utilize the tax credit over the next five years, with an “annual cash benefit of around $30 million.”
Operational drivers: marketing tie-ins, value platforms, and rising digital penetration
Raganato emphasized the company’s focus on optimizing current performance, maximizing returns on capital investments, and preparing for future business trends. He highlighted marketing initiatives during the quarter, including a “fully integrated menu strategy” tied to Netflix’s Stranger Things, which he said boosted sales and engagement. The company also leaned on value platforms such as Economia in Brazil and McPorMenos in Chile to appeal to price-sensitive consumers.
Menu innovation included a new chicken sandwich in Colombia and limited-time dessert flavors such as Ovomaltine in Brazil. Raganato also called out Happy Meal performance in several markets, supported by promotions tied to licenses including Friends, Zootopia 2, and Disney’s Villains.
Digital penetration reached a record 62% of total sales, driven by mobile app, delivery, and self-order kiosks. Management said digital channel sales grew 18.7% year-over-year, with strong performance in kiosks, delivery, and loyalty. The loyalty program ended the year with 27.2 million registered members and became available in all main markets as the company completed its planned 2025 rollout, covering more than 90% of restaurants.
Regional performance: Brazil improves sequentially; Mexico and SLAD remain key drivers
On a divisional basis, management said SLAD remained strong and both Brazil and the North Latin America Division (NOLAD) improved sequentially, contributing to consolidated growth.
- Brazil: Raganato said the restaurant industry’s traffic was down throughout the year, but the company saw “modest sequential improvement” in comparable sales growth during the fourth quarter and maintained a market share advantage. He noted that nearly three out of every four transactions were generated through digital channels and about 30% of total sales came through the loyalty platform, helped by the annual Méqui Friday campaign tied to Black Friday. Management also cited the Brazilian real’s relative strength versus the prior-year quarter as a contributor to U.S. dollar revenue growth.
- NOLAD: Comparable sales rose 1.7% year-over-year in the quarter, with strong guest traffic growth in several markets. Mexico was the main contributor, with comparable sales growth of 5.6%, which management said was about 1.5 times the country’s inflation.
- SLAD: Comparable sales increased 49.5% year-over-year, described as 1.2 times blended inflation, driven by Argentina and supported by continued momentum in markets including Colombia and the Dutch West Indies. Management also cited market share gains in Argentina and Chile.
Costs, margins, restructuring, and capital allocation moves
Tannenbaum said that for the first time in 2025, the fourth quarter included lower food and paper costs as a percentage of revenue in Brazil, which he said reflected effective marketing strategies and supplier negotiations. He noted that consolidated food and paper costs were affected by mix shifts in NOLAD and higher beef costs in Argentina.
On labor, he said payroll expenses rose as a percentage of revenue due to comparisons with a prior-year quarter that included a Brazil tax benefit; excluding that benefit, payroll expenses improved by about 60 basis points as a percentage of revenue. He added that payroll expenses were “among the lowest in our history” as a percentage of sales, citing productivity initiatives and technology.
The company also restructured G&A, reducing headcount in a process completed in the first quarter of 2026. Tannenbaum said adjusted EBITDA excludes reorganization and optimization charges, resulting in an $8.7 million add-back in the EBITDA reconciliation. He said the “ongoing cost base has been reduced by more than $10 million on an annualized basis,” and the restructuring was implemented across the three divisions and corporate.
On capital structure, Tannenbaum described a liability management transaction completed in the first quarter of 2026. He said the company’s Brazilian subsidiary secured $150 million in new bank debt maturing in 2029 and entered into derivatives to hedge the interest rate and maintain foreign currency exposure. The new bank debt carried an estimated U.S. dollar cost of 2.53%, and proceeds funded a tender offer for about $135 million of the company’s 2029 sustainability-linked bond with a 6.18% coupon. Tannenbaum said the transaction reduces the average U.S. dollar cost of long-term debt, improves capital structure efficiency, and increases the deductibility of interest expenses going forward.
In capital allocation, management said the company exceeded openings guidance in 2025 by opening 102 restaurants while deploying less total capital expenditures than in the prior year. About half of total CapEx was used to fund restaurant openings, and Tannenbaum said roughly 80% of 2025 CapEx was allocated to development and 20% to non-development items, mainly technology. For 2026, the company guided to 105 to 115 restaurant openings and total capital expenditures of $275 million to $325 million, with an expectation that roughly 85% will go to development and 15% to technology and other investments. The board also declared a cash dividend of $0.28 per share for 2026, up from $0.24 last year, payable in equal quarterly installments.
Looking ahead, management said early 2026 results have been “relatively strong,” and Tannenbaum said the company expects the underlying profitability trends from the fourth quarter to continue, with the potential for higher gross margin through 2026. Raganato said the company anticipates a more normalized consumer environment as the year progresses and reiterated a focus on “healthy” comparable sales while monetizing market share gains built over recent years.
About Arcos Dorados (NYSE:ARCO)
Arcos Dorados Holdings Inc is the largest independent McDonald’s franchisee in the world, operating under an exclusive license agreement with McDonald’s Corporation. The company develops, owns and operates quick-service restaurants, offering the full McDonald’s menu, including hamburgers, chicken sandwiches, salads, sides, desserts and McCafé beverages. In addition to restaurant operations, Arcos Dorados manages supply chain logistics, property development, training and support services for its franchise network.
Headquartered in Montevideo, Uruguay, Arcos Dorados serves 20 markets across Latin America and the Caribbean, including Argentina, Brazil, Chile, Colombia, Mexico, Puerto Rico and Uruguay.
