# Are dollar menu cheeseburgers loss leaders? **URL:** \ **Category:** Factual Questions\ **Created:** [December 8, 2009, 11:15pm UTC](https://boards.straightdope.com/t/are-dollar-menu-cheeseburgers-loss-leaders/520527 "2009-12-08T23:15:54Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Saint\_Cad](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/saint_cad/32/18907_2.png) [@Saint\_Cad](https://boards.straightdope.com/u/Saint_Cad)\ **Post date:** [December 9, 2009, 5:19pm UTC](https://boards.straightdope.com/t/are-dollar-menu-cheeseburgers-loss-leaders/520527/21 "2009-12-09T17:19:13Z")
> [@Philster](#): > > Now, if McDonalds ran their whole operation at a loss, burned through cash but survived long enough and with enough to bury a nearby competitor, that would not be McNice. But I do believe they would be eligible for TARP funds so Ronald could get his $200 million bonus. šŸ˜› ---
**Author:** ![Serenata67](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/serenata67/32/10646_2.png) [@Serenata67](https://boards.straightdope.com/u/Serenata67)\ **Post date:** [December 9, 2009, 5:20pm UTC](https://boards.straightdope.com/t/are-dollar-menu-cheeseburgers-loss-leaders/520527/22 "2009-12-09T17:20:08Z")
Now Iā€™m hungry for McDonaldā€™s McDoubles. And thereā€™s a massive blizzard where I am today. Itā€™s so bad they closed work. Thereā€™s no way Iā€™m going out for burgers. But I want one pretty badly! Damn you! ---
**Author:** ![lazybratsche](https://avatars.discourse-cdn.com/v4/letter/l/ba8739/32.png) [@lazybratsche](https://boards.straightdope.com/u/lazybratsche)\ **Post date:** [December 9, 2009, 5:34pm UTC](https://boards.straightdope.com/t/are-dollar-menu-cheeseburgers-loss-leaders/520527/23 "2009-12-09T17:34:17Z")
> [@gazpacho](#): > > I have also heard that this extends to most restaurants except it is the alcohol sales that make the difference between profit and loss. Oh, absolutely. I canā€™t say how profitable the food is, but thereā€™s thereā€™s a huge markup on alcohol. Around here, beer costs between 50 cents and 3 dollars per 12 oz can or bottle, and thatā€™s the retail cost. At a bar or restaurant, the very same beer will be between $2 and $8. Their cost is significantly lower than retail as well, since they buy kegs straight from the brewer (or distributor sometimes). Same goes for wine and hard alcohol. Iā€™d be surprised if food had profit margins anywhere near this high. So a meal for two will easily generate $10 or more in profit if the customers order a few drinks. ---
**Author:** ![Machine\_Elf](https://avatars.discourse-cdn.com/v4/letter/m/82dd89/32.png) [@Machine\_Elf](https://boards.straightdope.com/u/Machine_Elf)\ **Post date:** [December 9, 2009, 5:59pm UTC](https://boards.straightdope.com/t/are-dollar-menu-cheeseburgers-loss-leaders/520527/24 "2009-12-09T17:59:14Z")
> [@2ply](#): > > I worked at a couple of independent businesses that had soft drink fountains. It cost them about a nickel to fill up a cup of pop and they sell it for a little over a buck. Most places now donā€™t even invest the labor cost to fill your cup; ā€œhereā€™s your cup, go get your own damn soda.ā€ šŸ™‚ ---
**Author:** ![Ludovic](https://avatars.discourse-cdn.com/v4/letter/l/7ab992/32.png) [@Ludovic](https://boards.straightdope.com/u/Ludovic)\ **Post date:** [December 9, 2009, 6:42pm UTC](https://boards.straightdope.com/t/are-dollar-menu-cheeseburgers-loss-leaders/520527/25 "2009-12-09T18:42:26Z")
When I worked at a Burger King franchise I was amazed at how expensive their stacks of cups were when I saw them on the inventory sheet. I was told that they get sold to the franchises at a markup (I was told the total cost per cup was around 25 cents including markup but that seems high to me,) which is one way the parent company makes a profit, and is also the reason they give you a different cup to go with the water, as those arenā€™t sold at as much of a markup. For what itā€™s worth( and probably not a lot) ---
**Author:** ![The\_Second\_Stone](https://avatars.discourse-cdn.com/v4/letter/t/bbe5ce/32.png) [@The\_Second\_Stone](https://boards.straightdope.com/u/The_Second_Stone)\ **Post date:** [December 9, 2009, 7:01pm UTC](https://boards.straightdope.com/t/are-dollar-menu-cheeseburgers-loss-leaders/520527/26 "2009-12-09T19:01:23Z")
Keep in mind that they are buying their meat wholesale. I can buy sirloin patties at Costco for less than a buck each if I buy 20. ---
**Author:** ![friedo](https://avatars.discourse-cdn.com/v4/letter/f/8edcca/32.png) [@friedo](https://boards.straightdope.com/u/friedo)\ **Post date:** [December 9, 2009, 7:36pm UTC](https://boards.straightdope.com/t/are-dollar-menu-cheeseburgers-loss-leaders/520527/27 "2009-12-09T19:36:13Z")
> [@The\_Second\_Stone](#): > > Keep in mind that they are buying their meat wholesale. I can buy sirloin patties at Costco for less than a buck each if I buy 20. Actually as **Bubba** pointed out, they own a large proportion of their cattle and slaughterhouses, or contract exclusively with outside providers. That saves them even more money than buying from wholesalers on the open market. ---
**Author:** ![Ludovic](https://avatars.discourse-cdn.com/v4/letter/l/7ab992/32.png) [@Ludovic](https://boards.straightdope.com/u/Ludovic)\ **Post date:** [December 9, 2009, 8:01pm UTC](https://boards.straightdope.com/t/are-dollar-menu-cheeseburgers-loss-leaders/520527/28 "2009-12-09T20:01:04Z")
Plus, if Cecil is to be believed, a good portion of their meat is not really ā€œsirloin pattiesā€, but rather other cuts that sort of ā€œaverage outā€ to a decent-tasting cut. Granted, they are not using filler but rather, less expensive but still standard cuts, but even if they were paying the same price as you for the same cut, they might still be paying less for their patties due to using cheaper cuts of meat. ---
**Author:** ![curious11](https://avatars.discourse-cdn.com/v4/letter/c/ac91a4/32.png) [@curious11](https://boards.straightdope.com/u/curious11)\ **Post date:** [December 9, 2009, 8:50pm UTC](https://boards.straightdope.com/t/are-dollar-menu-cheeseburgers-loss-leaders/520527/29 "2009-12-09T20:50:00Z")
> [@pulykamell](#): > > Which is quality in this case? I want the 85/15 or 80/20 personally. Lean:fat is not an indicator of quality, necessarily. By quality I meant, personal choice. As you can pick whichever lean/fat ratio you desire, the percieved quality will go up as you approach your personal tastes/desire. I leave it up to you to decide which ratio is desireable. Turkey burger anyone? > [@Ludovic](#): > > ā€¦average out to a decent tasting cut." Well, decent tasting after being ā€œscentedā€ with ā€œMcDonaldā€™s Hamburger Scent #5ā€ (from Fast Food Nation, many chains apply a scent to the food so it all tastes the same, no matter where in the US the product is purchased) ---
**Author:** ![JpnDude](https://avatars.discourse-cdn.com/v4/letter/j/838e76/32.png) [@JpnDude](https://boards.straightdope.com/u/JpnDude)\ **Post date:** [December 10, 2009, 3:54am UTC](https://boards.straightdope.com/t/are-dollar-menu-cheeseburgers-loss-leaders/520527/30 "2009-12-10T03:54:54Z")
At McDonaldā€™s restaurants in Japan, a regular cheeseburger is **120yen** (part of Japanā€™s equivalent of the dollar menu). However, a double cheeseburger (with an extra patty and slice of cheese) is **270yen**. ---
**Author:** ![UltraVires](https://avatars.discourse-cdn.com/v4/letter/u/ecccb3/32.png) [@UltraVires](https://boards.straightdope.com/u/UltraVires)\ **Post date:** [December 10, 2009, 4:06am UTC](https://boards.straightdope.com/t/are-dollar-menu-cheeseburgers-loss-leaders/520527/31 "2009-12-10T04:06:19Z")
> [@lazybratsche](#): > > Oh, absolutely. I canā€™t say how profitable the food is, but thereā€™s thereā€™s a huge markup on alcohol. Around here, beer costs between 50 cents and 3 dollars per 12 oz can or bottle, and thatā€™s the retail cost. At a bar or restaurant, the very same beer will be between $2 and $8. Their cost is significantly lower than retail as well, since they buy kegs straight from the brewer (or distributor sometimes). Same goes for wine and hard alcohol. Iā€™d be surprised if food had profit margins anywhere near this high. > > So a meal for two will easily generate $10 or more in profit if the customers order a few drinks. True, but depending on the locale, the business owner has to contend with having a license to serve alcohol for on premise consumption vs. retail sales. In some areas of the US, that cost can be quite staggering. ---
**Author:** ![Shagnasty](https://avatars.discourse-cdn.com/v4/letter/s/9dc877/32.png) [@Shagnasty](https://boards.straightdope.com/u/Shagnasty)\ **Post date:** [December 10, 2009, 4:09am UTC](https://boards.straightdope.com/t/are-dollar-menu-cheeseburgers-loss-leaders/520527/32 "2009-12-10T04:09:04Z")
> [@lazybratsche](#): > > Oh, absolutely. I canā€™t say how profitable the food is, but thereā€™s thereā€™s a huge markup on alcohol. Around here, beer costs between 50 cents and 3 dollars per 12 oz can or bottle, and thatā€™s the retail cost. At a bar or restaurant, the very same beer will be between $2 and $8. Their cost is significantly lower than retail as well, since they buy kegs straight from the brewer (or distributor sometimes). Same goes for wine and hard alcohol. Iā€™d be surprised if food had profit margins anywhere near this high. > > So a meal for two will easily generate $10 or more in profit if the customers order a few drinks. When I worked in on-site catering and bartending in an upscale place in New Orleans (often weddings), my boss told us never to skimp on alcohol because it was impossible to lose money on it based on what they were paying per person. People always got what they asked for and usually on the generous side. A group of memorable guests kept ordering Absolute vodka on the rocks filled to the top and that is what they got. That is what a truly open bar is and it is stupid economy to see places that try to ration alcohol in the name of cost savings when it is bought in bulk and quite cheap unless it is something rare. Our orders were to just make people happy. ---
**Author:** ![SandyHook](https://avatars.discourse-cdn.com/v4/letter/s/dec6dc/32.png) [@SandyHook](https://boards.straightdope.com/u/SandyHook)\ **Post date:** [December 10, 2009, 4:24am UTC](https://boards.straightdope.com/t/are-dollar-menu-cheeseburgers-loss-leaders/520527/33 "2009-12-10T04:24:21Z")
I remember reading someplace that the owners of McDs have to pay 15% of the gross to McDonalds corporate. This is to cover national advertising and all that other stuff. That would have the local operater only getting $.85 per burger. Itā€™s hard to see how, when you factor in all the overhead and actual cost of the burger, there can be much profit. ---
**Author:** ![Tim\_T-Bonham.net](https://avatars.discourse-cdn.com/v4/letter/t/46a35a/32.png) [@Tim\_T-Bonham.net](https://boards.straightdope.com/u/Tim_T-Bonham.net)\ **Post date:** [December 10, 2009, 6:54am UTC](https://boards.straightdope.com/t/are-dollar-menu-cheeseburgers-loss-leaders/520527/34 "2009-12-10T06:54:21Z")
> [@SandyHook](#): > > I remember reading someplace that the owners of McDs have to pay 15% of the gross to McDonalds corporate. This is to cover national advertising and all that other stuff. > > That would have the local operater only getting $.85 per burger. Itā€™s hard to see how, when you factor in all the overhead and actual cost of the burger, there can be much profit. Yes, 15% as a franchise fee is typical. This can be negotiated up or down, depending on things like how badly McDonalds wants a store in this town, if the franchisee already operates one or more stores, etc. And the local McDonalds place probably does NOT make a profit on the Dollar menu burger; itā€™s likely they only break even, or even take a small loss on it. But thatā€™s what is meant by a _loss leader_ ā€“ something they sell at a loss to lead customers into the door. Few customers just buy the Dollar menu burgers ā€“ most also add fries & a pop, which probably makes the whole order profitable. Just like grocery stores often have sales on milk or bread, and actually lose money on them ā€“ but by the time the customer walks out with a bag or two of other groceries, the store has made a profit from that customer. ---
**Author:** ![Labrador\_Deceiver](https://avatars.discourse-cdn.com/v4/letter/l/7c8e57/32.png) [@Labrador\_Deceiver](https://boards.straightdope.com/u/Labrador_Deceiver)\ **Post date:** [December 10, 2009, 5:26pm UTC](https://boards.straightdope.com/t/are-dollar-menu-cheeseburgers-loss-leaders/520527/35 "2009-12-10T17:26:11Z")
> [@gazpacho](#): > > I have also heard that this extends to most restaurants except it is the alcohol sales that make the difference between profit and loss. Not really true. Yes, soft drink sales are nothing but profit. It is incorrect that they run their business on those profits alone. ---
**Author:** ![Labrador\_Deceiver](https://avatars.discourse-cdn.com/v4/letter/l/7c8e57/32.png) [@Labrador\_Deceiver](https://boards.straightdope.com/u/Labrador_Deceiver)\ **Post date:** [December 10, 2009, 5:30pm UTC](https://boards.straightdope.com/t/are-dollar-menu-cheeseburgers-loss-leaders/520527/36 "2009-12-10T17:30:33Z")
> [@lazybratsche](#): > > Oh, absolutely. I canā€™t say how profitable the food is, but thereā€™s thereā€™s a huge markup on alcohol. Around here, beer costs between 50 cents and 3 dollars per 12 oz can or bottle, and thatā€™s the retail cost. At a bar or restaurant, the very same beer will be between $2 and $8. Their cost is significantly lower than retail as well, since they buy kegs straight from the brewer (or distributor sometimes). Same goes for wine and hard alcohol. Iā€™d be surprised if food had profit margins anywhere near this high. > > So a meal for two will easily generate $10 or more in profit if the customers order a few drinks. When I managed a pizza restaurant in college, alcohol markup was 200% and food markup was 300%. That was somewhat of an industry standard. ---
**Author:** ![Ruminator](https://avatars.discourse-cdn.com/v4/letter/r/b9bd4f/32.png) [@Ruminator](https://boards.straightdope.com/u/Ruminator)\ **Post date:** [December 10, 2009, 5:39pm UTC](https://boards.straightdope.com/t/are-dollar-menu-cheeseburgers-loss-leaders/520527/37 "2009-12-10T17:39:55Z")
> [@Labrador\_Deceiver](#): > > Not really true. Yes, soft drink sales are nothing but profit. It is incorrect that they run their business on those profits alone. I donā€™t know if it makes a difference but **gazpacho** ā€™s quote was ā€œalcoholā€ not ā€œsoda.ā€ I remember talking to some business men who were experienced in partnering up with others (talented chefs) to open new restaurants. One of the things they said was a challenge was getting the liquor license. If liquor license was denied (e.g. failed background check, etc), then no restaurant was launched. So profits of liquor played a major role in even opening the restaurant at all. ---
**Author:** ![Labrador\_Deceiver](https://avatars.discourse-cdn.com/v4/letter/l/7c8e57/32.png) [@Labrador\_Deceiver](https://boards.straightdope.com/u/Labrador_Deceiver)\ **Post date:** [December 10, 2009, 5:45pm UTC](https://boards.straightdope.com/t/are-dollar-menu-cheeseburgers-loss-leaders/520527/38 "2009-12-10T17:45:26Z")
> [@Ruminator](#): > > I donā€™t know if it makes a difference but **gazpacho** ā€™s quote was ā€œalcoholā€ not ā€œsoda.ā€ Soda is more profitable than alcohol, and it isnā€™t even close. > [@](#): > > I remember talking to some business men who were experienced in partnering up with others (talented chefs) to open new restaurants. One of the things they said was a challenge was getting the liquor license. If liquor license was denied (e.g. failed background check, etc), then no restaurant was launched. So profits of liquor played a major role in even opening the restaurant at all. You are assuming that liquor profits were the motive in this situation. They arenā€™t (at least not 100% of the motive, anyway). A lot of folks wonā€™t bother to eat at a dry restaurant. ---
**Author:** ![Tim\_T-Bonham.net](https://avatars.discourse-cdn.com/v4/letter/t/46a35a/32.png) [@Tim\_T-Bonham.net](https://boards.straightdope.com/u/Tim_T-Bonham.net)\ **Post date:** [December 10, 2009, 6:59pm UTC](https://boards.straightdope.com/t/are-dollar-menu-cheeseburgers-loss-leaders/520527/39 "2009-12-10T18:59:50Z")
> [@Labrador\_Deceiver](#): > > Soda is more profitable than alcohol, and it isnā€™t even close. Selling alcohol has significant cost increases over selling soda: [ul] [li]cost of a liquor license[/li][li]required to hire adult workers at higher wages[/li][li]greatly increased insurance costs[/li][li]more problems with unruly customers ā€“ probably need to hire a bouncer some hours[/li][li]more problems with neighbors ā€“ customers puking/pissing in their bushes[/li][/ul]So despite high markups for alcohol, soda probably is more profitable overall. ---
**Author:** ![joebuck20](https://avatars.discourse-cdn.com/v4/letter/j/74df32/32.png) [@joebuck20](https://boards.straightdope.com/u/joebuck20)\ **Post date:** [December 10, 2009, 8:56pm UTC](https://boards.straightdope.com/t/are-dollar-menu-cheeseburgers-loss-leaders/520527/40 "2009-12-10T20:56:35Z")
> [@t-bonham@scc.net](#): > > Selling alcohol has significant cost increases over selling soda: > [LIST] > [li]required to hire adult workers at higher wages[/li] I think this one depends on the state you live in. In my area I regularly see teenage servers carrying alcoholic drinks in casual dining restaurants. [Previous page](https://boards.straightdope.com/t/are-dollar-menu-cheeseburgers-loss-leaders/520527.md?page=1) [Next page](https://boards.straightdope.com/t/are-dollar-menu-cheeseburgers-loss-leaders/520527.md?page=3)