Joining with the other major credit ratings agencies, Fitch Ratings on Friday downgraded its issuer default rating on McDonald’s Corp. (NYSE: MCD) from A to BBB+ on long-term debt and from F2 to F1 on short-term debt. Fitch maintained its Stable rating on the company.

The assumptions behind Fitch’s downgrade include, among other things:

• Low single-digit declines in same-store sales in the near term
• Contracting margins in 2015 that are expected to expand “meaningfully” later as a result of refranchising and cost reductions
• Positive operating cash flow not resuming until 2016

S&P lowered its rating on McDonald’s debt from A to A-, which is one notch better than the Fitch downgrade. Moody’s has placed the burger giant’s ratings on review for downgrade from the current rating of A2.

Fitch is blunt about its reasoning:

The downgrade reflects Fitch’s view that McDonald’s has become more aggressive with its financial strategy and also concerns about continued sales declines, market share losses, and brand strength going-forward. McDonald’s plans to return $8 billion to $9 billion of cash to shareholders via dividends and share repurchases in 2015 and to achieve the high end of its three-year $18 billion to $20 billion cash return target by the end of 2016.

Given softness in its business, as evidenced by weak first quarter results, McDonald’s will have to incur substantial debt to satisfy its cash return goal.

Fitch, like Moody’s and S&P, does not accept on faith that McDonald’s turnaround actions will work as magically as the company thinks. Fitch notes:

Fitch has taken into consideration the potential for meaningful cash proceeds and margin accretion from refranchising 3,500 company-operated units by 2018 and the $300 million of annual net G&A savings expected by 2017. However, the pace at which benefits from refranchising will be realized is uncertain, and it is Fitch’s view that management may be willing to maintain higher amounts of leverage going forward.

In McDonald’s favor is its substantial cash flow from operations. Fitch noted, however, that cash flow is declining and Fitch sees free cash flow being directed to share buybacks rather than boosting sales by adding new locations. Capex has declined by a third since 2012, and refranchising could indicate that capital spending will continue to decline to pay the tab for shareholder returns.

McDonald’s stock traded up about 1.5% in the early afternoon Friday, at $98.18 in a 52-week range of $87.62 to $103.78.

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