Cost of a Big Mac Combo Meal

Introduction

• $18 for a Big Mac meal (burger, medium fries, Coke) in some places.
• Rising fast-food prices observed over recent months.
• Possible industry-wide impact on fast-food pricing standards.
• Example: Darien, Connecticut where Big Mac meal costs $18, with the burger alone priced at $10.19.

McDonald's Historical Pricing

• Known for quick, cheap meals for decades.
• Reports suggest prices increased by over 100% in the last decade.
• Social media and news outlets have highlighted these price rises.

Analysis of McDonald's Costs and Profits

• Revenue Model: Primarily through rent and fees from franchise owners, allowing low food prices.
• Bulk Purchasing: Largest buyer of beef, pork, potatoes, apples, lettuce, tomatoes in the world.
• Specific Partnerships: Coca-Cola products bought cheaply, sold at a massive markup.
• Profit Margins: Claims of 25% profit on each Big Mac.
• Comparison: Self-cooking a Big Mac would generally cost more than buying from McDonald's.

Cost Breakdown of a Big Mac

• Waste Sheet Data: Historical waste sheets show increase in cost from $0.77 to $0.87 over six years.
• Inflation Influence: Correlation with inflation; 37% increase in production cost (approx. $1.06 in 2024).
• Average Price Rise: From $3.99 in 2014 to $5.29 now, a 32% rise below inflation rates.
• Other Factors Influencing Price: Rental costs, employee wages, maintenance, etc.

Comparison Across Locations

• San Jose Example: Even with high rent and wages, Big Mac only costs $5.73, highlighting location variance.
• Franchisee Pricing Rights: Franchisees can set their own prices based on various factors like wealth and ease of access.

Impact of $10 Big Mac

• Potential for Industry Ripple Effect: Higher McDonald's prices might lead competitors to raise their prices too.
• Profit Strategies: Competition-driven pricing can lead to universal price increases in fast food.
• Long-term Impact: Possibility of $10 Big Macs becoming standard due to ripple effects.

Conclusion

• The $10 Big Mac could indicate broader changes in fast food pricing.
• Franchisee pricing autonomy contributes to price variations.
• Industry trends might lead to overall higher prices for fast food.