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Margin. McDonald's average profit margin for the past five years has been 23%. Sometimes they increase margin on price. But more often, they do it on labor a
by Digory 6y ago
Margin. McDonald's average profit margin for the past five years has been 23%.
Sometimes they increase margin on price. But more often, they do it on labor and cost of goods. McDonalds takes no-skill workers, applies its systems, and spits out 5 billion cheeseburgers at five nines consistency. And then it buys in quantities that move world markets, unlike your locavore restaurant.
Five Guys will have lower margins, but still be 4-10x the margin of a one-off restaurant. Same for Cheesecake Factories, and all the Darden-owned restaurants.
- chii 6y agosounds like to me that one-off restaurants' owners want to be artisans and craftsman, not running a business. It's like an engineer who values good code and high quality engineering, but is beaten out by massive outsourced labour that optimizes for business value.
- AmVess 6y agoThe silliest one I've been to was an upscale pizza joint that sold tiny $28 pizzas because they were "artisanal". They didn't make it 6 months. I walked in, looked at the portions and the price and walked out.
- mytherin 6y agoNot really, it's just simple economies of scale. Large chains have a natural advantage in the restaurant business just like they have a natural advantage in any other field. A small restaurant simply cannot have as high a margin as McDonalds because they don't have the same bargaining power with their suppliers - they need to pay more for everything.