As of June 30, 2026, we leased over 15,700 properties in China for our Company-owned restaurants. We generally enter into lease agreements for our restaurants with initial terms of 10 to 20 years. Most of our lease agreements contain termination options that permit us to terminate the lease agreement early if the restaurant profit is negative for a specified period of time. We generally do not have renewal options for our leases. Such options are accounted for only when it is reasonably certain that we will exercise the options. The rent under the majority of our current restaurant lease agreements is generally payable in one of three ways: (i) fixed rent; (ii) the higher of a fixed base rent or a percentage of the restaurant’s sales; or (iii) a percentage of the restaurant’s sales. Most leases require us to pay common area maintenance fees for the leased property. In addition to restaurants leases, we also lease office spaces, logistics centers and equipment. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

In limited cases, we sub-lease certain restaurants to franchisees in connection with refranchising transactions or lease our properties to other third parties. The lease payments under these leases are generally based on the higher of a fixed base rent or a percentage of the restaurant’s annual sales. Income from sub-lease agreements with franchisees or lease agreements with other third parties are included in Franchise fees and income and Other revenues, respectively, within our Condensed Consolidated Statements of Income.


Supplemental Balance Sheet
	6/30/2026		12/31/2025		Account Classification
Assets
Operating lease right-of-use assets	$	2,114	$	2,189	Operating lease right-of-use assets
Finance lease right-of-use assets		49		49	PP&E, net
Total leased assets(a)	$	2,163	$	2,238

Liabilities
Current
Operating lease liabilities	$	433	$	438	Accounts payable and other current liabilities
Finance lease liabilities		6		6	Accounts payable and other current liabilities
Non-current
Operating lease liabilities		1,747		1,823	Non-current operating lease liabilities
Finance lease liabilities		50		51	Non-current finance lease liabilities
Total lease liabilities(a)	$	2,236	$	2,318


Summary of Lease Cost
	Quarter Ended						Year to Date Ended
	6/30/2026			6/30/2025			6/30/2026			6/30/2025			Account Classification

Operating lease cost	$	127		$	122		$	256		$	246		Occupancy and other operating expenses, G&A or Franchise expenses
Finance lease cost
Amortization of leased assets		2			2			3			3		Occupancy and other operating expenses
Interest on lease liabilities		—			—			1			1		Interest income, net
Variable lease cost		114			103			238			218		Occupancy and other operating expenses or Franchise expenses
Short-term lease cost		2			3			5			7		Occupancy and other operating expenses or G&A
Sub-lease income		(4	)		(4	)		(9	)		(9	)	Franchise fees and income or Other revenues
Total lease cost	$	241		$	226		$	494		$	466


Supplemental Cash Flow Information
	Year to Date Ended
	6/30/2026		6/30/2025
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	251	$	253
Operating cash flows from finance leases		1		1
Financing cash flows from finance leases		3		3
Right-of-use assets obtained in exchange for lease liabilities(b):
Operating leases	$	61	$	113
Finance leases		1		1

(b)

This supplemental non-cash disclosure for ROU assets obtained in exchange for lease liabilities includes an increase in lease liabilities associated with obtaining new ROU assets of $122 million and $126 million for the years to date ended June 30, 2026 and 2025, as well as adjustments to lease liabilities or ROU assets due to modification or other reassessment events, which resulted in a $60 million and $12 million decrease in lease liabilities for the years to date ended June 30, 2026 and 2025, respectively.


Lease Term and Discount Rate
	6/30/2026			6/30/2025
Weighted-average remaining lease term (years)
Operating leases		6.7			6.8
Finance leases		10.0			10.6

Weighted-average discount rate
Operating leases		3.9	%		4.3	%
Finance leases		4.0	%		4.5	%

Maturities of lease liabilities as of June 30, 2026 were as follows:


	Amount of Operating Leases		Amount of Finance Leases		Total
Remainder of 2026	$	272	$	4	$	276
2027		455		8		463
2028		396		7		403
2029		331		7		338
2030		274		7		281
Thereafter		751		35		786
Total undiscounted lease payment		2,479		68		2,547
Less: imputed interest(c)		299		12		311
Present value of lease liabilities	$	2,180	$	56	$	2,236

(c)

As the rate implicit in the lease cannot be readily determined, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the imputed interest and present value of lease payments. We used the incremental borrowing rate on January 1, 2019 for operating leases that commenced prior to that date.

As of June 30, 2026, we have additional lease agreements that have been signed but not yet commenced, with total undiscounted minimum lease payments of $77 million. These leases will commence between the third quarter of 2026 and 2027 with lease terms of 1 year to 20 years.