Where Do Fast Food Restaurants Really Make Their Money?

Fast food restaurants do not make a lot of money on sandwiches. Recently Wendy's was giving away a free ¼ pound hamburger (coupon provided on the web) with the purchase of a small drink and fry. The cost of the hamburger alone was $3.99. A combo meal for the burger costs $5.99. The cost of the small drink and fry (with the free burger) came to just over $4.00. This $2.00 difference deserves some investigation.

First the soda. A fast food soda (18 oz) that sells for $1.99 costs the restaurant about $0.16, a markup of more than 1250 %. The fast food soda costs $0.11 an ounce. Compare that to bulk purchase of canned soda. A 12-pack of canned soda on sale is $3.00, or $0.25 a can, or $0.02 an ounce.

Now for the fries. A leading fast food restaurant pays about $3 for a 10 pound bag of very large potatoes. There are about 16 very large potatoes in the bag and fry uses about ½ of a potato. So this puts the food cost of a fry at $0.10. Add $0.20 for oil, seasoning, energy, wages, and overhead places the cost to manufacture at $0.30. On average, a fry costs $2.00, making the markup about 666%. .

Now for the burger. A $4.00 burger cost about $2.00 to makes, for a 100% profit.

So in the case of the Wendy's "free" burger, Wendy's breaks even on the burger for $2.00, but still makes 333% on the fry and ~600% on the soda.

So much for that free burger….