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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-5231

McDONALD'S CORPORATION
(Exact name of registrant as specified in its charter)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

        Indicate by check mark whether registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ý No o

        The aggregate market value of voting stock held by nonaffiliates of the registrant was $36,208,412,413 as of June 30, 2002. The number of shares of common stock outstanding was 1,268,809,982 as of January 31, 2003.

DOCUMENTS INCORPORATED BY REFERENCE.

Part III of this Form 10-K incorporates information by reference from the registrant's 2002 definitive proxy statement which will be filed no later than 120 days after December 31, 2002.

Part I
Item 1. BUSINESS

McDonald's Corporation, the registrant, together with its subsidiaries, is referred to herein as the "Company."

(a)    GENERAL DEVELOPMENT OF BUSINESS

During 2002, there have been no significant changes to the Company's corporate structure or material changes in the Company's method of conducting business.

(b)    FINANCIAL INFORMATION ABOUT SEGMENTS

Segment data for the years ended December 31, 2002, 2001 and 2000 are included in Part II, Item 8, page 34 of this Form 10-K.

(c)    NARRATIVE DESCRIPTION OF BUSINESS

General

The Company operates in the food service industry and primarily operates and franchises quick-service restaurant businesses under the McDonald's brand. These restaurants serve a varied, yet limited, value-priced menu (see Products) in 119 countries around the world.

        The Company also operates other restaurant concepts under its Partner Brands: Boston Market, Chipotle Mexican Grill and Donatos Pizzeria, which are all located primarily in the U.S. In addition, the Company has a minority ownership interest in U.K.-based Pret A Manger. In March 2002, the Company sold its Aroma Café business in the U.K.

        Since McDonald's restaurant business comprises virtually all of the Company's consolidated operating results, this narrative primarily relates to the McDonald's restaurant business, unless otherwise noted.

        All restaurants are operated by the Company or, under the terms of franchise arrangements, by franchisees who are independent entrepreneurs, or by affiliates operating under joint-venture agreements between the Company and local business people.

        The Company's operations are designed to assure consistency and high quality at every McDonald's restaurant. When granting franchises and forming joint-venture agreements, the Company is selective and is not in the practice of franchising to, or partnering with, investor groups or passive investors.

        Under the conventional franchise arrangement, franchisees provide capital by initially investing in the equipment, signs, seating and décor of their restaurant businesses, and by reinvesting in the business over time. The Company shares the investment by generally owning or leasing the land and building. Franchisees contribute to the Company's revenue stream through payment of rent and service fees based upon a percent of sales, with specified minimum payments, along with initial fees. The conventional franchise arrangement typically lasts 20 years and franchising practices are generally consistent throughout the world. A discussion regarding site selection is included in Part I, Item 2, page 4 of this Form 10-K.

        The Company, its franchisees and affiliates purchase food, packaging, equipment, etc., from numerous independent suppliers who have been approved by the Company. The Company has established and strictly enforces high quality standards. The Company has quality assurance labs around the world that work to ensure that our high standards are consistently met. The quality assurance process not only involves ongoing product reviews, but also on-site inspections of suppliers' facilities. Further, there is a Quality Assurance Board, composed of the Company's technical, safety and supply chain specialists, which provides strategic global leadership for all aspects of food quality and safety. In addition, the Company works closely with suppliers to encourage innovation, assure best practices and drive continuous improvement.

        Independently owned and operated distribution centers, also approved by the Company, distribute products and supplies to most McDonald's restaurants. In addition, restaurant personnel are trained in the proper storage, handling and preparation of our products and in the delivery of customer service.

        McDonald's global brand is well known. Marketing, promotional and public relations activities are designed to nurture McDonald's brand image and differentiate the Company from competitors. Marketing and promotional efforts focus on value, food taste and the customer experience. In addition, the Company is focused on being a leader in the area of social responsibility, as the Company believes it is important to give back to the people and communities around the world who are responsible for our success.

Products

McDonald's restaurants offer a substantially uniform menu. In addition, McDonald's tests new products on an ongoing basis.

        McDonald's menu includes hamburgers and cheeseburgers, Big Mac, Quarter Pounder with Cheese, Big N' Tasty, Filet-O-Fish and several chicken sandwiches, Chicken McNuggets, french fries, salads, milk shakes, McFlurry desserts, sundaes and soft serve cones, pies, cookies and soft drinks and other beverages. In addition, the restaurants sell a variety of other products during limited-time promotions.

        McDonald's restaurants operating in the U. S. and certain international markets are open during breakfast hours and offer a full- or limited-breakfast menu. Breakfast offerings may include the Egg McMuffin and Sausage McMuffin with Egg sandwiches, hotcakes, biscuit and bagel sandwiches and muffins.

        Chipotle serves gourmet burritos and tacos. Donatos sells pizza, submarine sandwiches and salads. Boston Market is a home-meal replacement concept serving chicken, meatloaf and a variety of other main and side dishes. Pret A Manger is a quick-service food concept that serves mainly prepared and packaged cold sandwiches, snacks and drinks during lunchtime.

Intellectual property

The Company owns valuable intellectual property including trademarks, service marks, patents, copyrights, trade secrets and other proprietary information, some of which, including "McDonald's," "Ronald McDonald," "Big Mac" and other related marks, are of material importance to the Company's business. The Company also has certain patents on restaurant equipment which, while valuable, are not material to its business.

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Seasonal operations

The Company does not consider its operations to be seasonal to any material degree.

Working capital practices

Information about the Company's working capital practices is incorporated herein by reference to Management's discussion and analysis of financial condition and results of operations for the years ended December 31, 2002, 2001 and 2000 in Part II, Item 7, pages 9 through 22, and the Consolidated statement of cash flows for the years ended December 31, 2002, 2001 and 2000 in Part II, Item 8, page 26 of this Form 10-K.

Customers

The Company's business is not dependent upon a single customer or small group of customers.

Backlog

Company-operated restaurants have no backlog orders.

Government contracts

No material portion of the business is subject to renegotiation of profits or termination of contracts or subcontracts at the election of the U.S. government.

Competition

McDonald's restaurants compete with international, national, regional and local retailers of food products. The Company competes on the basis of price, convenience and service and by offering quality food products. The Company's competition in the broadest perspective includes restaurants, quick-service eating establishments, pizza parlors, coffee shops, street vendors, convenience food stores, delicatessens and supermarkets.

        In the U.S., there were about 526,000 restaurants that generated $320 billion in annual sales in 2002. McDonald's restaurant business accounts for 2.6% of those restaurants and 6.3% of the sales. No reasonable estimate can be made of the number of competitors outside the U.S.

Research and development

The Company operates a research and development facility in Illinois. While research and development activities are important to the Company's business, these expenditures are not material. Independent suppliers also conduct research activities for the benefit of the McDonald's System, which includes franchisees and suppliers, as well as the Company, its subsidiaries and joint ventures.

Environmental matters

The Company is not aware of any federal, state or local environmental laws or regulations that will materially affect its earnings or competitive position, or result in material capital expenditures; however, the Company cannot predict the effect on its operations of possible future environmental legislation or regulations. During 2002, there were no material capital expenditures for environmental control facilities and no such material expenditures are anticipated.

Number of employees

During 2002, the Company's average number of employees worldwide, including Company-operated restaurant employees, was approximately 413,000. This includes employees at McDonald's Company-operated restaurants as well as other restaurant concepts operated by the Company.

(d)    FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS

Financial information about foreign and domestic markets is incorporated herein by reference to Management's discussion and analysis of financial condition and results of operations in Part II, Item 7, pages 9 through 22 and Segment and geographic information in Part II, Item 8, page 34 of this Form 10-K.

(e)    AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities Exchange Act of 1934 (Exchange Act). The Company therefore files periodic reports, proxy statements and other information with the Securities and Exchange Commission (SEC). Such reports may be obtained by visiting the Public Reference Room of the SEC at 450 Fifth Street, NW, Washington, D.C. 20549, or by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically.

        Financial and other information can be accessed on the Investor section of the Company's website at www.mcdonalds.com. The Company makes available, free of charge, copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the SEC. Copies of financial and other information are also available free of charge by calling 1-630-623-7428, or by sending a request to McDonald's Corporation Investor Relations Service Center, McDonald's Plaza, Oak Brook, Illinois 60523.

Item 2. PROPERTIES

The Company identifies and develops sites that offer convenience to customers and long-term sales and profit potential to the Company. To assess potential, the Company analyzes traffic and walking patterns, census data, school enrollments and other relevant data. The Company's experience and access to advanced technology aid in evaluating this information. The Company generally owns the land and building or secures long-term land and building leases for restaurant sites, which ensures long-term occupancy rights and helps control related costs. Restaurant profitability for both the Company and franchisees is important; therefore, ongoing efforts are made to control average development costs through construction and design efficiencies and standardization and by leveraging the Company's global sourcing network. Additional information about the Company's properties is included in

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Management's discussion and analysis of financial condition and results of operations in Part II, Item 7, pages 9 through 22 and in Financial statements and supplementary data in Part II, Item 8, pages 23 through 39 of this Form 10-K.

Item 3. LEGAL PROCEEDINGS

The Company has pending a number of lawsuits which have been filed from time to time in various jurisdictions. These lawsuits cover a broad variety of allegations spanning the Company's entire business. The following is a brief description of the more significant of these categories of lawsuits. In addition, the Company is subject to various federal, state and local regulations that impact various aspects of its business, as discussed below. The Company does not believe that any such claims, lawsuits or regulations will have a material adverse effect on its financial condition or results of operations.

Franchising

A substantial number of McDonald's restaurants are franchised to independent entrepreneurs operating under arrangements with the Company. In the course of the franchise relationship, occasional disputes arise between the Company and its franchisees relating to a broad range of subjects including, but not limited to, quality, service and cleanliness issues, contentions regarding grants or terminations of franchises, franchisee claims for additional franchises or rewrites of franchises, and delinquent payments. Additionally, occasional disputes arise between the Company and individuals who claim they should have been granted a McDonald's franchise.

Suppliers

The Company and its affiliates and subsidiaries do not supply, with minor exceptions outside the U.S., food, paper or related items to any McDonald's restaurants. The Company relies upon numerous independent suppliers that are required to meet and maintain the Company's high standards and specifications. On occasion, disputes arise between the Company and its suppliers on a number of issues including, by way of example, compliance with product specifications and the Company's business relationship with suppliers. In addition, disputes occasionally arise on a number of issues between the Company and individuals or entities who claim that they should be (or should have been) granted the opportunity to supply products or services to the Company's restaurants.

Employees

Thousands of people are employed by the Company and in restaurants owned and operated by subsidiaries of the Company. In addition, thousands of people, from time to time, seek employment in such restaurants. In the ordinary course of business, disputes arise regarding hiring, firing and promotion practices.

Customers

The Company's restaurants serve a large cross-section of the public. In the course of serving so many people, disputes arise as to products, service, accidents, advertising, nutritional and other disclosures as well as other matters typical of an extensive restaurant business such as that of the Company.

Intellectual property

The Company has registered trademarks and service marks, some of which are of material importance to the Company's business. The Company also has certain patents on restaurant equipment which, while valuable, are not material to its business. From time to time, the Company may become involved in litigation to defend and protect its use of its intellectual property.

Government regulations

Local, state and federal governments have adopted laws and regulations involving various aspects of the restaurant business, including, but not limited to, franchising, health, safety, environment, zoning and employment. The Company does not believe that it is in violation of any existing statutory or administrative rules, but it cannot predict the effect on its operations from the issuance of additional requirements in the future.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

None.

THE FOLLOWING ARE THE EXECUTIVE OFFICERS OF THE COMPANY:

        Claire H. Babrowski, 45, is President of McDonald's Asia/Pacific, Middle East and Africa, a position to which she was appointed in June 2001. From January 2000 to June 2001 she was Executive Vice President, Worldwide Restaurant Systems; from June 1998 to January 2000 she was Executive Vice President, U.S. Restaurant Systems; and from May 1997 to June 1998 she was Senior Vice President, U.S. Restaurant Systems. Ms. Babrowski has been with the Company for 25 years.

        Charles H. Bell, 42, is President and Chief Operating Officer, effective January 2003. From June 2001 to December 2002 he was President of McDonald's Europe; from September 1999 to June 2001 he was President of McDonald's Asia/Pacific, Middle East and Africa; and from 1993 to September 1999 he was Managing Director of McDonald's Australia. Mr. Bell has been with the Company for 27 years.

        James R. Cantalupo, 59, is Chairman and Chief Executive Officer, a position to which he was appointed effective January 2003. From January to December 31, 2002 he was Vice Chairman, Emeritus and President, Emeritus. From December 1999 to December 2001 he was Vice Chairman and President. From August 1998 to December 1999 he was Vice Chairman, Chairman and Chief Executive Officer of McDonald's International. From January 1992 to August 1998 he was President and Chief Executive Officer, McDonald's International. Mr. Cantalupo has been with the Company for 29 years.

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        Mats Lederhausen, 39, is President of the Business Development Group, a position to which he was appointed in January 2003. From July 2001 to January 2003 he served as Executive Vice President of Strategy and Corporate Development; from December 2000 to July 2001 he served as Senior Vice President, Corporate Strategy; and from April 1999 to July 2000 he served as Vice President. Before joining McDonald's corporate staff, Mr. Lederhausen was Managing Director and Joint-Venture Partner for Svenska McDonald's Development AB, a subsidiary of the Company. He is no longer Managing Director and Joint-Venture Partner of that subsidiary. Mr. Lederhausen has been with the McDonald's System for 18 years.

        M. Lawrence Light, 61, is Corporate Executive Vice President—Global Chief Marketing Officer. He has served in that position since joining the Company in September 2002. Prior to joining McDonald's, he was President and Chief Executive Officer of Arcature, a brand consultancy. Mr. Light has been with the Company for less than one year.

        Matthew H. Paull, 51, is Corporate Executive Vice President and Chief Financial Officer, a position to which he was elected in July 2001. Prior to that time, he served as Senior Vice President, Corporate Tax and Finance from December 2000 to July 2001; Senior Vice President from January 2000 to December 2000; and Vice President from June 1993 to January 2000. Mr. Paull has been with the Company for 9 years.

        David M. Pojman, 43, is Corporate Senior Vice President—Controller, a position he has held since March 2002. Previously, he served as Vice President and Assistant Corporate Controller from January 2000 to March 2002; and from July 1997 to January 2000 he served as Vice President—International Controller. Mr. Pojman has been with the Company for 20 years.

        Michael J. Roberts, 52, is President—McDonald's USA, a position he has held since June 2001. From July 1997 to June 2001 he was President, West Division. Mr. Roberts has been with the Company for 25 years.

        Eduardo Sanchez, 45, is President—Latin America and Canada Group, a position to which he was appointed in January 2003. Previously, he was President of the Latin America Group from May 1999 to January 2003; and International Relationship Partner for Latin America from November 1995 to May 1999. Mr. Sanchez has been with the Company for 26 years.

        Gloria Santona, 52, is Corporate Senior Vice President, General Counsel and Secretary, a position she has held since June 2001. From December 2000 to June 2001 she was Vice President, U.S. General Counsel and Secretary; and from March 1997 to December 2000 she was Vice President, Deputy General Counsel and Secretary. Ms. Santona has been with the Company for 25 years.

        James A. Skinner, 58, is Vice Chairman. Mr. Skinner was appointed to his current position effective January 2003. Previously, he served as President and Chief Operating Officer of McDonald's Worldwide Restaurant Group from February 2002 to December 2002. Prior to that, he served as President and Chief Operating Officer of McDonald's Europe, Asia/Pacific, Middle East and Africa from June 2001 to February 2002; and President of McDonald's Europe from December 1997 to June 2001. Mr. Skinner has been with the Company for 32 years.

        Russell P. Smyth, 46, is President—McDonald's Europe, a position to which he was appointed in January 2003. Previously, he served as President of Partner Brands from December 2001 to January 2003; International Relationship Partner for Southeast and Central Asia from May 1999 to December 2001; and Vice President of the Latin America Group from July 1996 to May 1999. Mr. Smyth has been with the Company for 19 years.

        Stanley R. Stein, 60, is Executive Vice President, Corporate Human Resources, a position he has held since July 1997. Prior to that time, Mr. Stein served as Senior Vice President. Mr. Stein has been with the Company for 28 years.

Part II

Item 5A. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The Company's common stock trades under the symbol MCD and is listed on the New York and Chicago stock exchanges in the U.S.

        The following table sets forth the common stock price ranges on the New York Stock Exchange composite tape and dividends declared per common share.

        The approximate number of shareholders of record and beneficial owners of the Company's common stock as of January 31, 2003 was estimated to be 1,032,000.

        Given the Company's returns on equity and assets, management believes it is prudent to reinvest a significant portion of earnings back into the business and use excess cash flow for debt repayments and share repurchases. Accordingly, the common stock dividend yield is modest. The Company has paid dividends on common stock for 27 consecutive years through 2002 and has increased the dividend amount at least once every year. Additional dividend increases will be considered after reviewing returns to shareholders, profitability expectations, financing needs and tax treatment of dividends. Dividends are declared and paid on an annual basis. As in the past, future dividends will be declared at the discretion of the Company's Board of Directors.

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Item 5B. EQUITY COMPENSATION PLAN INFORMATION

The following table summarizes information about our equity compensation plans as of December 31, 2002. All outstanding awards relate to our common stock. Shares awarded under all of the following plans may be from the Company's treasury or may be otherwise acquired in the open market.

(1)

Included in this information are the following plans and the related number of securities available for future issuance under these plans as approved by security holders:

2001 Omnibus Stock Ownership Plan. 29,673,065 shares

1992 Stock Ownership Incentive Plan. no shares

1975 Stock Ownership Option Plan. 3,370,942 shares

(2)

The following plans, or the addition of shares to existing plans, not approved by shareholders are as follows:

Directors' Stock Plan. The Plan provides an opportunity for outside directors and senior directors to defer some or all of their annual retainers and Board and Committee meeting fees. In addition, each director receives a credit of $17,500 to his or her plan account at the end of each full year of service, up to a maximum of 10 years. Each director's plan account is credited with a number of shares as though the deferred amounts had been invested in the Company's common stock, and the number of shares is adjusted for dividends paid on the Company's common stock. Upon retirement, or a date specified by the director, the director receives cash payments based on the value of the shares credited to the director's account, in a lump sum or, if the director elects, in installments for a period of up to 15 years. A director may elect to receive payment in the form of shares of common stock.

1999 Non-Employee Director Stock Option Plan. The Plan provided for the granting of stock options to non-employee directors. There were initial stock option grants of 5,000 shares to directors when they joined the board; and an annual stock option grant of 5,000 shares as of the date the director was elected or re-elected at the Company's annual meeting of shareholders. Options have a ten-year term and become exercisable in increments of 33% on the first, second and third anniversary dates of the grant. No future grants will be made under this plan.

The Deferred Income Plan, now part of the Supplemental Profit Sharing and Savings Plan, was adopted to enable participants to defer receipt of all or any portion of their incentive payments and up to 90% of their base pay. Payments under this plan may be in cash or shares. There are 200,000 shares in this plan.

Of the 69,205,034 shares to be issued upon the exercise of outstanding options, 69,011,034 shares were added to the 1992 Stock Ownership Incentive Plan and the 1975 Stock Ownership Option Plan without security holder approval.

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Item 6.    SELECTED FINANCIAL DATA

11-YEAR SUMMARY

(1)

Includes pretax operating charges of $853 million ($700 million after tax or $0.55 per share) primarily related to restructuring markets and eliminating positions, restaurant closings/asset impairment and the write-off of technology costs. (The cash portion of this pretax expense was approximately $100 million after tax.) See page 9 for further details.

(2)

Includes $378 million of pretax operating charges primarily related to the U.S. business reorganization and other global change initiatives, and restaurant closing/asset impairment charges discussed on page 9.

(3)

Includes pretax operating charges of $322 million ($219 million after tax or $0.16 per share) consisting of $162 million of Made For You costs and the $160 million charge related to the home office productivity initiative.

(4)

Includes a net pretax expense of $253 million ($143 million after tax or $0.11 per share) consisting of $378 million of pretax operating charges noted in (2) above and $125 million of net pretax nonoperating income primarily related to a gain on the initial public offering of McDonald's Japan. (The cash portion of this net pretax expense was approximately $100 million after tax.) See page 9 for further details. Net income also reflects an effective tax rate of 29.8 percent, primarily due to the benefit of tax law changes in certain international markets ($147 million).

(5)

In 2002, includes a $98.6 million after-tax charge ($0.08 per share—basic and $0.07 per share—diluted) to reflect the cumulative effect of the adoption of SFAS No. 142, Goodwill and Other Intangible Assets, which eliminates the amortization of goodwill and instead subjects it to annual impairment tests. See page 17 for further discussion. Net income per share, adjusted for the nonamortization provisions of SFAS No. 142, would have been $0.02 higher than the amount reported for 2001 and 2000 and $0.01 higher for 1996-1999.

(6)

Systemwide sales include sales by all restaurants, whether operated by the Company, by franchisees or by affiliates operating under joint-venture agreements. See page 11 for further discussion.

(7)

See page 17 for detail of Systemwide restaurants by geographic segment and Partner Brand.

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Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

NATURE OF BUSINESS

The Company operates in the food service industry and primarily operates and franchises quick-service restaurant businesses under the McDonald's brand (McDonald's restaurants). Approximately 80% of McDonald's restaurants and about 75% of the total revenues of McDonald's restaurants are in nine markets: Australia, Brazil, Canada, China, France, Germany, Japan (a 50%-owned affiliate accounted for under the equity method), the United Kingdom and the United States. Throughout this discussion, McDonald's restaurant businesses in these nine markets collectively are referred to as "major markets."

        The Company also operates other restaurant concepts under its Partner Brands: Boston Market, Chipotle Mexican Grill and Donatos Pizzeria. In addition, the Company has a minority ownership in Pret A Manger. In March 2002, the Company sold its Aroma Café business in the U.K.

CONSOLIDATED OPERATING RESULTS