(Originally written in 2020, prices may have (probably) changed)
A four-piece chicken nugget Happy Meal at McDonald’s costs $4.49. The meal has four nuggets, kid-sized fries, 236 mL of chocolate milk, and apple slices.
At Burger King, the chicken nuggets alone cost $5, and adding a drink and fries makes it $7.78. So why is McDonald’s so cheap? Food at McDonald’s is cheap because of…
The ingredients it uses
Moving work to poor countries and the environment
It pays its employees minimum wage
1. McDonald’s Cheap Ingredients
McDonald’s food is cheap because of the ingredients, specifically the meat. McDonald’s buys a lot of meat wholesale and at very cheap prices.
“McDonald’s is actually the largest purchaser of beef, and potatoes in the United States. They are also the second-largest purchaser of chicken.”(Low)
McDonald’s buys a lot of ingredients with not much time to fill the order. So cows are put on bad eating habits in order to fatten them up faster. The meat is mass-produced and low-quality. This means the cost of buying the meat is very low compared to what most people buy at Walmart.
How The McDonald’s Brand Cuts Prices
Being one of McDonald’s suppliers is good business for whoever McDonald’s is buying from, and those businesses give McDonald’s huge discounts in order to keep supplying McDonald’s. One example is Coca-Cola.
“The two companies forged a relationship decades ago. Since then, Coca-Cola has been the restaurant’s soft drink provider. For this right, the beverage company offers McDonald’s steep discounts on their products.”(Sheldon)
Coca-Cola also gives them more benefits because McDonald’s is a common brand name. McDonald’s can cut prices through its suppliers, but it saves even more money by shipping the work overseas to cheaper countries.
2. How McDonald’s Exploits Cheap Labor
McDonald’s doesn’t directly exploit countries and their environment but outsources the work to poor countries to fill the order. Since McDonald’s has big orders, more cows need to be processed. More cows mean more land is needed.
“One place that McDonald’s gets their resources from is the Amazon Rainforest. Some of their beef is reared on land in the Amazon, making the land unable to regenerate and produce anything else.”(Low)
Cows aren’t the only thing McDonald’s buys. Potatoes, eggs, and other ingredients needed to make food are produced in other countries where labor is extremely cheap, cutting the cost significantly. Most of these countries have terrible working conditions and don’t have environmental protection or business regulations, making it easy to cut corners.
OSI Food Solutions: McDonald’s Cheap Overseas Supplier
McDonald’s outsources some of the food production to OSI Food Solutions, a global food producer. OSI runs facilities in North America and South America, but mostly in Europe and Asia.
Most of the facilities in Europe and Asia are in countries with low minimum wages and cheap production costs, such as Ukraine, Poland, China, and India. All of these countries have a minimum wage under $5 an hour, with India having a minimum wage of $6.35 a day.
However, McDonald’s has realized their impact on the environment and other countries, and like other big companies, it’s moving towards a more environmentally and climate-friendly footprint. And although McDonald’s can outsource food production to cheaper countries, it still needs to pay employees to run the kitchens and restaurants…
3. McDonald’s Low Wages
McDonald’s can afford to be cheap because the employees are paid as low as possible. The federal minimum wage in the United States is $7.25, but most states have a minimum wage of around $8–10.
“On average, fast food workers make $8.92 per hour. Working 40 hours per week, for 52 weeks per year, an average fast food worker would make $18,533.60 per year. The median annual wage in the United States is $38,640.” (Sheldon)
McDonald’s is an appealing opportunity for people who need a job or for under 18 teens wanting to make money. The thing is, wages aren’t really decided by the McDonald’s Corporation but by individual McDonald’s franchisees.
What is Franchising? How Does Franchising Work?
Franchisees are people who buy into the McDonald’s brand, manage a location, and give a share of the money to the McDonald’s Corporation, which is in charge of everything. The McDonald’s Corporation earns money with little risk, while McDonald’s franchisees do the hard work and pay more money.
“Taken from the McDonald’s 2017 franchise disclosure documents, the total cost to buy your own McDonald’s franchise is going to range from just over 1 million dollars to about 2.2 million dollars.” (Mangum)
McDonald’s charges a lot for people to own a franchise, and even then, the franchisee takes care of everything and pays huge rent and fees to the McDonald’s Corporation. Labor is half of the process of making food, and not having to pay much for labor means that food can be sold for way cheaper than the competition.
McDonald’s cuts corners in order to sell food at a cheap cost. The Travis Scott meal at McDonald’s costs less than a salad at Zaxby’s. Salads generally cost more than regular fast food because the government gives more subsidies to the meat industry than to the fruit and vegetable industries.
But McDonald’s sells salads that cost about $4.80, almost half the price of most salads.
Why is McDonald’s So Cheap?
So why is McDonald’s so cheap? McDonald’s is cheaper than most other restaurants because of the quality of the food, taking advantage of the environment, and cheap labor. The cheap cost of McDonald’s food is what made McDonald’s popular and it looks like it will continue to make McDonald’s even more money in the future.