Everyone knows that one of the biggest uses of millenial money is eating out. Cooking for ourselves just hasn’t been drilled into us as one of the top ways to save money (I suppose they cut home economics out of the curriculum at some point?). The reality is that a very small minority of the cost of a delivered meal actually goes towards the food itself. Highlighting this might make some think twice about how often they are ordering in for dinner.
Sample Doordash Receipt.
Let’s have a look at a sample delivery order for breakfast. One of the world’s most legendary investors, Warren Buffet, famously still eats breakfast at McDonalds. He’s worth over $85 billion and still has breakfast for under $4 – fascinating.
Let’s use Warren’s favourite breakfast meal as an example, the Egg McMuffin.
An Egg McMuffin Extra Value meal, with a coffee and hashbrown, costs $7.19. This is the price that you would pay if you were in a McDonalds restaurant in person and ate breakfast there. Seems reasonable so far. Let’s checkout and see what other costs are associated with getting the food via Doordash.
So our $7.19 McMuffin has now added on a $2.99 delivery fee, a $1.08 service fee, a $2 small order fee, $0.66 in taxes and a $3 driver tip. The all in total cost of this meal has ballooned to $16.92!
So how much of the $7.19 cost actually goes towards the food itself? Well, McDonalds is a publicly traded company and therefore since its stock is traded on the stock exchange, it is required to release financial statements to the investing public. Most McDonald’s restaurants are owned by franchisees, but the corporation does own and operate many on its own as well. Let’s take a look at McDonald’s Income Statement, below.
So based on the above, which is for the full year ended December 31, 2019, the company owned restaurants sold $9.4 billion of food and beverage products. Accounting principals require the restaurant to show the costs associated with that revenue, so if you move your eyes down the list a few rows, you’ll see “Company-operated restaurant expenses”. This shows the costs associated with earning the “Company-operated sales”. As you can see, Food & Paper amounts to $2.98 billion, and this INCLUDES the cost of things like wrappers, cups, sandwich boxes and napkins. If we’re generous and lump in the paper costs, this cost of $2.98 billion, as a percentage of sales, indicates that McDonalds pays $.32 in food and paper costs for every dollar of sales.
Therefore, our $7.19 Egg McMuffin has a food and paper cost of $2.28.
So now you can see, of the nearly $17 it costs to get Doordash delivered, we get food worth $2.28 which represents just over 13% of the total cost. The remaining 87% of the cost goes to labour and overhead at Mcdonalds, delivery charges, Doordash fees, tips and taxes.
Now that you see that the food you’re ordering is ultimately marked up by 700% over what you could buy the groceries for yourself, you’ll see why making the financial choice to make your own food as opposed to eating out is a MAJOR way for you to save money and contribute to your financial portfolio.