An interesting investigation showcased why the world’s largest fast food chain’s food products are so cheap. The modern success of the Golden Arches is attributed to Ray Kroc, a businessman that joined the company as a franchise agent in 1955 and proceeded to purchase the chain from the McDonald brothers.
Kroc helped develop McDonald’s business practices that allows it to sell food for a low-cost and still make over $20 billion USD annually. Even though the fast food chain sells affordable food, they are still able to make money due to their focus on profitable food items.
The chain’s soda is sold at a 1,150 percent markup, while coffee is marked up 2,900 percent and egg-based breakfast items cost less than $1 USD to make. It is also interesting to note that Kids Meals’ smaller portions and fewer ingredients also provides McDonald’s with a great profit margin. Franchises also play a role in Mcdonald’s huge profit machine, franchisees all pay an upfront cost of $45,000 USD followed by four percent of gross sales each month.
WRITTEN BY: Majid Alhusseini