The 9% Edge

CHAPTER 4Real-World Revenue Growth

Success in business is determined by your ability to acquire new customers and retain them for the long term.

I don’t know where the myth originates from, but there is a widely spread misconception that the global mega company McDonald’s doesn’t make a profit on cheeseburgers alone.

While it’s true that some items on their menu are strategically priced to attract customers, and subsequently do have lower profit margins, McDonald’s still makes a profit on their cheeseburgers.

Even though McDonald’s is very much in the real estate business – it owns one of the largest real estate empires in the world – they are still very much in the food and franchise business, collecting more than $25 billion in revenue in 2023 alone. Although they collected $7.3 billion in rental income, they still need to flip burgers because if their franchises were to fail, McDonald’s would fail. Still, there is a lot to learn from how they employ a sophisticated pricing and menu strategy that considers both individual item profitability and the overall spending patterns of their customers.

While the profit on a single cheeseburger is currently less than five cents, when they ask customers to add fries and a drink, it significantly boosts the overall profitability of each transaction. Fries and drinks are far more significant, with soft drinks having 90% profit. This makes combo meals the backbone of their model and why they’re heavily promoted by employees and tracked ...