The fast-food business quiz (now with answers)

[kranky]

Just interested to see people's guesses.

1. How much does the average McDonald's restaurant sell in a year (in dollars)?
2. For a franchised (non-company owned) store, what percentage of sales is profit?
3. What is the primary reason that fast-food places want to start accepting credit/debit cards?


Answers below.

 

[vi edit]

Am I allowed to answer?

 

[TommyVercetti]

1) ~2 Million
2) 22%
3) Cash is too risky.

 

[dman]

I could google search, but, guessing is so much more interesting...

1. Avg store makes, hmm, $1.5Mil gross.
2. Hmm.. guess it depends on the soda sales... seeing as how they have biggiesize everything nowadays, I'll guess, oh on avg, 15% (net profit). after everything is paid off.
3. Convenience for customers.

 

[astroview]

doesn't the company make most money from real estate?

 

[Encryptic]

Originally posted by: astroview
doesn't the company make most money from real estate?

How does a fast food place make money from real estate? I'm having trouble seeing the connection here.

 

[kranky]

Originally posted by: vi_edit
Am I allowed to answer?

You are disqualfied.

 

[CPA]

Originally posted by: kranky
Just interested to see people's guesses.

1. How much does the average McDonald's restaurant sell in a year (in dollars)?
2. For a franchised (non-company owned) store, what percentage of sales is profit?
3. What is the primary reason that fast-food places want to start accepting credit/debit cards?

1. Not sure, though I guess I could check their Edgar filings
2. Probably 3-6%
3. Want or Won't? I know that MickeyDs tried it a few years back, but then stopped. If it's want, I would say convenience.

 

[astroview]

Originally posted by: Encryptic

Originally posted by: astroview
doesn't the company make most money from real estate?

How does a fast food place make money from real estate? I'm having trouble seeing the connection here.

In 1960 Kroc's corporation had turned a paltry profit of $77,000, less than half of what was paid to the brothers in California. But the company's net worth had jumped from $24,000 in 1958 to $16 million in 1960, mostly as a result of Kroc's "extremely silent partner," a financial wizard named Harry Sonneborn. Sonneborn had hit on a way of building assets that was virtually independent of the "millions sold" slogan touted by Kroc's marketing people. He proposed buying the ground under the stores and leasing it to the operators. Sonneborn, no burger evangelist like Kroc, "viewed the food service business as a vehicle for making money in real estate."

McDonalds was at the leading edge of the suburban boom of the '50s and '60s, and Sonneborn began to acquire valuable property by using franchisees' security deposits as downpayments and charging store owners "rent" that financed the company's purchase of the land. The minimum monthly fee was a 20- to 40-percent markup of McDonalds' cost, and additional fees were charged if sales went over a certain figure. Since many McDonalds franchises were instant moneymakers, Sonneborn not only covered the company's "investment," he began to generate land-office profits that were basically independent of burger sales. "His idea is what really made McDonalds rich," said Kroc some years later.

http://www.swarthmore.edu/bulletin/archive/96/nov96/backpages.html

 

[Mutilator]

Originally posted by: kranky

Originally posted by: vi_edit
Am I allowed to answer?

You are disqualfied.

Aw let him answer.

1.) $3.65 million
2.) 37%
3.) So employees stop playing $1 for me $1 for the register.

 

[TommyVercetti]

So what are the correct answers?

 

[reitz]

1. $1.83 mullion
2. 1%
3. To keep a greater percentage of sales

 

[kranky]

ANSWERS:

1. The average McDonald's grosses $1.5 million a year.
2. For franchised ones, the average net profit is 5%-7% (for a $1.5 million gross, that would mean a yearly profit of $75K-105K).
3. The primary reason fast-food places want to accept credit/debit cards is that the average purchase is 30%-50% higher when a customer pays with plastic, according to a study conducted by Visa.

 

[Spac3d]

Originally posted by: kranky
ANSWERS:

1. The average McDonald's grosses $1.5 million a year.
2. For franchised ones, the average net profit is 5%-7% (for a $1.5 million gross, that would mean a yearly profit of $75K-105K).
3. The primary reason fast-food places want to accept credit/debit cards is that the average purchase is 30%-50% higher when a customer pays with plastic, according to a study conducted by Visa.

Interesting. I assumed the profit would have been higher than that - if that is what the average McDonalds makes... then the ones near me must make a lot more. They have one of those super extended drive thru's for lunch ... and it still loops into a circle:Q

 

[Kenny]

That's some pretty sweet profit.

 

[Rapidskies]

Originally posted by: kranky
ANSWERS:

1. The average McDonald's grosses $1.5 million a year.
2. For franchised ones, the average net profit is 5%-7% (for a $1.5 million gross, that would mean a yearly profit of $75K-105K).
3. The primary reason fast-food places want to accept credit/debit cards is that the average purchase is 30%-50% higher when a customer pays with plastic, according to a study conducted by Visa.

5% profit, on that heavy of an investment (McDonalds cost quite abit to get a franchise), is terrible. You could take your million+ invest it, come out ahead and not have the headache of dealing with your own company.

 

[LeeTJ]

Originally posted by: Whade

Originally posted by: kranky
ANSWERS:

1. The average McDonald's grosses $1.5 million a year.
2. For franchised ones, the average net profit is 5%-7% (for a $1.5 million gross, that would mean a yearly profit of $75K-105K).
3. The primary reason fast-food places want to accept credit/debit cards is that the average purchase is 30%-50% higher when a customer pays with plastic, according to a study conducted by Visa.

5% profit, on that heavy of an investment (McDonalds cost quite abit to get a franchise), is terrible. You could take your million+ invest it, come out ahead and not have the headache of dealing with your own company.

and yet there is still a waiting list of people that want McD franchises.

just shows you how unimaginative and afraid of risk most people are.