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Other people have answered your question directly, but I just wanted to add this: One of the things I have learned since starting and seriously optimising a con

Other people have answered your question directly, but I just wanted to add this: One of the things I have learned since starting and seriously optimising a consumer-focused full time business last year is that consumer discretionary spending, at least in the current era of opulence and advertising, does not follow the laws of economics in the same way that it does for commodity businesses. Unless you're doing something really wrong, the labour cost to produce most consumer goods is both much smaller than the gross profit from the sale, and largely uncorrelated to the price.

akiselev 5y ago
Generally that's true in the consumer space but the food business has few barriers of entry so it's very competitive and low margin. Most restaurants barely make 30% gross margin after labor and COGS, before rent and marketing. McDonalds is a special case though, both because of its franchise model and because its corporate owned restaurants are largely real estate plays. The latter have a much more complex pricing model that takes into account property taxes, available borrowing terms, VAT, etc along with the usual labor and cost of materials. A McD's in a cheap part of El Paso, Texas might be paying 2% property taxes on its prime real estate while an equivalent location in an expensive part of Denmark might pay a lower .92%. Meanwhile the latter is appreciating at thrice the speed and passing more of the tax burden onto the customer in the form of a 20% VAT that doesn't appear in the sticker price.
- AussieWog93 5y ago
  >Generally that's true in the consumer space but the food business has few barriers of entry so it's very competitive and low margin. Most restaurants barely make 30% gross margin after labor and COGS, before rent and marketing. Not an expert in this area, but I'd be shocked if McDonalds' books looked anything like a typical restaurant's - real estate investments aside.

akiselev 5y ago

Generally that's true in the consumer space but the food business has few barriers of entry so it's very competitive and low margin. Most restaurants barely make 30% gross margin after labor and COGS, before rent and marketing. McDonalds is a special case though, both because of its franchise model and because its corporate owned restaurants are largely real estate plays. The latter have a much more complex pricing model that takes into account property taxes, available borrowing terms, VAT, etc along with the usual labor and cost of materials. A McD's in a cheap part of El Paso, Texas might be paying 2% property taxes on its prime real estate while an equivalent location in an expensive part of Denmark might pay a lower .92%. Meanwhile the latter is appreciating at thrice the speed and passing more of the tax burden onto the customer in the form of a 20% VAT that doesn't appear in the sticker price.

AussieWog93 5y ago
>Generally that's true in the consumer space but the food business has few barriers of entry so it's very competitive and low margin. Most restaurants barely make 30% gross margin after labor and COGS, before rent and marketing. Not an expert in this area, but I'd be shocked if McDonalds' books looked anything like a typical restaurant's - real estate investments aside.