McDONALD’S: What Franchisees Make on a $1 Burger

November 17, 2009 unhappyzee

Question: Can McDonald’s franchise owners really make money on a dollar-menu hamburger?

Answer: A little. But they’ve got to make it up on higher profit items – like fries and soda – if they want to stay in business.

SmartMoney.com surveyed franchisees from different franchise chains regarding the cost to them of some current and recent promotions. The Smart Money article points out that franchisees generally bear the brunt of a promotions’s cost, including the food, labor, rent and utilities, among other things.

Here’s the Smart Money finding for the McDonald’s $1 burger on their dollar menu, which report a $.06 profit per sandwich:

McDonald’s

Promotion: Dollar Menu – McDonald’s customers may purchase a number of items, including French fries, an ice cream sundae, a four-piece chicken nuggets and a double cheeseburger for a dollar each.

Pre-promotion price: $1.50 (double cheeseburger)

Promotion Price: $1

Bottom line for restaurant: Profit of roughly 6 cents a burger

The McDonald’s Dollar Menu may be the best value in town, but some franchisees find the six-year-old promotion hard to stomach. While food and packaging costs just 45 cents for a double cheese burger, franchisees also have to pay for rent, labor and utilities. In total, a promotional price of just $1 leaves store operators with a measly 6 cents of profit, according to a franchisee in Florida. Of course the markup on fountain drinks and French fries is typically pretty high. However, many consumers these days are forgoing such add-ons. McDonald’s did not immediately return phone calls and emails seeking comment.