5 ms·

I for one am shocked a Big Mac costs $5.81 in the United States. It's been too long I guess but I remember the meals going for $5-6 when I was a kid. And that's

by bko 5y ago

I for one am shocked a Big Mac costs $5.81 in the United States. It's been too long I guess but I remember the meals going for $5-6 when I was a kid. And that's national average too, not an expensive metro area. Surely there were advances in production and logistics that would have lowered the "real" cost of McDonalds delivering a Big Mac, so all else being equal we would expect the price to drop over time. But monetary inflation makes up for it and then some.

throwaway22032 5y ago
I think the index is skewed by the fact that the offers work differently in different countries. In France the sandwich isn't much cheaper than the meal. The last time I was in Russia (lowest price on the chart) as I recall there's not as much of a saving for buying the meal.
MyHypatia 5y ago
Yes, I am surprised too. Especially when an In-n-Out Double Double costs $4.20 (this is in expensive California) and their burger has more meat. Plus In-n-out is notoriously generous with worker pay and benefits ($14 - $38 per hour, 401k benefits, health benefits, and paid holidays and vacation). I guess for McDonald's that extra money goes to advertising and executive pay?
eru 5y ago
> Surely there were advances in production and logistics that would have lowered the "real" cost of McDonalds delivering a Big Mac, so all else being equal we would expect the price to drop over time. For that, you should look at number of minutes (or hours) the average person needs to work to afford a local Big Mac. Wikipedia's entry on the Big Mac index says that https://web.archive.org/web/20080216015122/http://www.ubs.com/1/ShowMedia/ubs_ch/wealth_mgmt_ch?contentId=103982&name=eng.pdf https://web.archive.org/web/20080216015122/http://www.ubs.co... should provide this information. Or see https://www.statista.com/statistics/275235/big-mac-worldwide-cities-working-time/ https://www.statista.com/statistics/275235/big-mac-worldwide...
- bko 5y ago
  I meant more on the production side. Like how much labor and raw material is required to make a Big Mac. But I guess if you consider the price relative to typical wages then it should give you a similar effect, although it would ignore the advancements in capital productivity which may not be reflected in wage data.
  - Moru 5y ago
    If there are improvements on the cost of material the profit margin for the restaurant gets bigger. The price to customer stays the same.
  - eru 5y ago
    That's an interesting perspective? Advances is capital productivity usually drive wages higher pretty soon, no? In any case, I just brought up this 'minutes of labour for one Big Mac' index, because I remembered that some people had already done the numbers and it seemed somewhat relevant to your question. I have no clue whether it's the best index anyone could come up with.
jeromegv 5y ago
Well first the price is built to entice you to get a value meal. Second, there's a non-insignificant time for labor on making the Big Mac + we all know that the cost of beef is increasing quite a bit overtime. And while McDonalds are expert at logistics, you could argue that they have been expert for so long now that they already got all the savings they could have gone many years ago. At the end of the day, it's expensive beef, with a labor shortage. I'd find it surprising it didn't increase more.
tinotopia 5y ago
In the past few years, McDonald's (and some, but not all, other fast food restaurants) really seems to have gone all-in on the price-discrimination approach of setting list prices high and offering all kinds of discounts if you know where to look. Relevant to the Big Mac Index, at the moment the app offers a two-for-one deal, through February 27, on Big Macs; so the effective price isn't $5.81 but $2.90. If you don't want two Big Macs, you can get free fries or a free drink, or both, or 20% off your whole order instead: but you can only use one discount every fifteen minutes, and you can only use any specific discount once per day. The implication for the Big Mac Index is that in the face of the complex web of discounts offered by McDonald's it's nearly impossible to calculate the actual price of a Big Mac in the United States for general purposes. That the 'discount' is offered through February 27 shows that this isn't really a discount but effectively the regular price for people who order through the app. The choice of the 27th for the end date leads me to suspect that they might be lifting the discount for one day a month to keep the FTC happy.
- Scoundreller 5y ago
  Same in Canada. List price is $6.29, but the app routinely sends me coupons for $3.29 per unit. And then there’s some points/rebate with each purchase.
- JohnBooty 5y ago
  In the past few years, McDonald's (and some, but not all, other fast food restaurants) really seems to have gone all-in on the price-discrimination approach of setting list prices high and offering all kinds of discounts if you know where to look. Not that this is exactly some secret but a while back, it was explained to us (by somebody reasonably high up the org chart at McDonalds) is that the sandwiches themselves were money-losers, but that fries and drinks were essentially pure profit. (Thus, the birth of the infamous "super size it!" promotion) They reallllly don't want you going in there and just buying sandwiches.
  - sdze 5y ago
    They must hate me because I only buy 4 hamburgers.

by bko 5y ago

throwaway22032 5y ago

I think the index is skewed by the fact that the offers work differently in different countries. In France the sandwich isn't much cheaper than the meal. The last time I was in Russia (lowest price on the chart) as I recall there's not as much of a saving for buying the meal.

MyHypatia 5y ago

Yes, I am surprised too. Especially when an In-n-Out Double Double costs $4.20 (this is in expensive California) and their burger has more meat. Plus In-n-out is notoriously generous with worker pay and benefits ($14 - $38 per hour, 401k benefits, health benefits, and paid holidays and vacation). I guess for McDonald's that extra money goes to advertising and executive pay?

eru 5y ago

> Surely there were advances in production and logistics that would have lowered the "real" cost of McDonalds delivering a Big Mac, so all else being equal we would expect the price to drop over time. For that, you should look at number of minutes (or hours) the average person needs to work to afford a local Big Mac. Wikipedia's entry on the Big Mac index says that https://web.archive.org/web/20080216015122/http://www.ubs.com/1/ShowMedia/ubs_ch/wealth_mgmt_ch?contentId=103982&name=eng.pdf https://web.archive.org/web/20080216015122/http://www.ubs.co... should provide this information. Or see https://www.statista.com/statistics/275235/big-mac-worldwide-cities-working-time/ https://www.statista.com/statistics/275235/big-mac-worldwide...

bko 5y ago
I meant more on the production side. Like how much labor and raw material is required to make a Big Mac. But I guess if you consider the price relative to typical wages then it should give you a similar effect, although it would ignore the advancements in capital productivity which may not be reflected in wage data.
- Moru 5y ago
  If there are improvements on the cost of material the profit margin for the restaurant gets bigger. The price to customer stays the same.
- eru 5y ago
  That's an interesting perspective? Advances is capital productivity usually drive wages higher pretty soon, no? In any case, I just brought up this 'minutes of labour for one Big Mac' index, because I remembered that some people had already done the numbers and it seemed somewhat relevant to your question. I have no clue whether it's the best index anyone could come up with.

jeromegv 5y ago

Well first the price is built to entice you to get a value meal. Second, there's a non-insignificant time for labor on making the Big Mac + we all know that the cost of beef is increasing quite a bit overtime. And while McDonalds are expert at logistics, you could argue that they have been expert for so long now that they already got all the savings they could have gone many years ago. At the end of the day, it's expensive beef, with a labor shortage. I'd find it surprising it didn't increase more.

tinotopia 5y ago

In the past few years, McDonald's (and some, but not all, other fast food restaurants) really seems to have gone all-in on the price-discrimination approach of setting list prices high and offering all kinds of discounts if you know where to look. Relevant to the Big Mac Index, at the moment the app offers a two-for-one deal, through February 27, on Big Macs; so the effective price isn't $5.81 but $2.90. If you don't want two Big Macs, you can get free fries or a free drink, or both, or 20% off your whole order instead: but you can only use one discount every fifteen minutes, and you can only use any specific discount once per day. The implication for the Big Mac Index is that in the face of the complex web of discounts offered by McDonald's it's nearly impossible to calculate the actual price of a Big Mac in the United States for general purposes. That the 'discount' is offered through February 27 shows that this isn't really a discount but effectively the regular price for people who order through the app. The choice of the 27th for the end date leads me to suspect that they might be lifting the discount for one day a month to keep the FTC happy.

Scoundreller 5y ago
Same in Canada. List price is $6.29, but the app routinely sends me coupons for $3.29 per unit. And then there’s some points/rebate with each purchase.
JohnBooty 5y ago
In the past few years, McDonald's (and some, but not all, other fast food restaurants) really seems to have gone all-in on the price-discrimination approach of setting list prices high and offering all kinds of discounts if you know where to look. Not that this is exactly some secret but a while back, it was explained to us (by somebody reasonably high up the org chart at McDonalds) is that the sandwiches themselves were money-losers, but that fries and drinks were essentially pure profit. (Thus, the birth of the infamous "super size it!" promotion) They reallllly don't want you going in there and just buying sandwiches.
- sdze 5y ago
  They must hate me because I only buy 4 hamburgers.