How Do Fast Food Restaurants Make Money?

Fast food restaurants are all over and they provide meals at a reasonable price. Have you ever wondered “how do fast food restaurants make money?” We will tell you how they do this in this post. The truth is that the larger fast food restaurants make a great deal of money because they employ different strategies to do this.

Coupons from Fast Food Restaurants

A lot of fast food restaurants will give you coupons when you make a purchase. On the surface, it looks as if they want you to save even more money by eating in their restaurants. But the truth is that these coupons will usually cause you to spend more money than you anticipated.

Coupons are a deliberate strategy that fast food restaurants use to increase their profits and it works well for them. By discounting their prices even further, they already know that it will result in more customers attending their restaurants.

Have you seen a fast food restaurant offer a free menu? This happens sometimes and is another effective trick. They know that if you claim a free burger for example, you are going to want to purchase more things to go along with it. Usually, this includes a drink and some fries and you end up spending money anyway.

The Limited Menu Strategy

Quite a number of fast food restaurants will provide limited menus to their customers. This helps the restaurant to minimize their overheads which increases their profits. Only offering limited menu items means that they can prepare these items at the lowest possible cost.

The Five Guys restaurant is famous for this. To begin with, the prices in a Five Guys restaurant tend to be among the highest of the fast food chains. They do specialize in burgers but there are other foods available too.

Think about what it costs to order fries in a Five Guys restaurant. You will spend a few dollars on this but the cost to the restaurant of these fries is just a few cents. They deliberately do not offer many other side dishes, so chances are that you will order the extremely profitable fries from them.

The Value Meals Strategy

If you have visited a fast food restaurant before, you have probably seen “value” meals offered there. These have low prices and are not usually that profitable (if at all) for the restaurant. In fact, most of the fast food restaurants would like to get rid of the value meal altogether. But they don’t do this because they know they are very popular with customers.

The main reason that fast food restaurants offer value meals is to get as many people into their establishments as they can. And this works very well. Once the customers are in the restaurant, they can “upsell” them to purchase other items which are much more profitable for them.

How do Fast Food Restaurants Make Money – the Upsells

A fast food restaurant will use the value meal to get you through the door. Once you are at the counter, they will use tactics to tempt you away from the lower priced meals to more expensive items. A lot of other industries use the upsell tactic because it is so effective and brings in higher profits.

You may have every intention of just ordering a low-priced value meal when you walk in to the restaurant. But then you see what else is on offer and you are tempted by these things. Milk shakes, apple pies and other things are very hard to resist.

The person serving you will also try to persuade you to make a larger purchase. You have probably had a server ask you if you want “large” fries with your meal instead of the standard size. They do this because it works. Restaurants do the math here, and they can accurately predict that a certain percentage of the customers will “go large”.

A study at the Eastern Illinois University discovered that when people are asked directly, they will eat 85% more. The lure of additional food is hard to resist when another person asks you if you want it.

Although you had the intention of only spending $3 in the restaurant, you end up spending closer to $10. This is all because you were asked by the server if you wanted more items. The psychology behind this is very interesting. But more importantly, it is a tactic that works and used by all fast food restaurants.

Upsells usually Cost a lot more

When the server is upselling you on a particular item, it is usually going to cost you quite a bit more than the items you have already ordered. Fancy side dishes are very inexpensive for the restaurant to create, but they charge a high price for them.

One of the most profitable upsells for a fast food restaurant are the soft drinks. A restaurant can make as much as 90% profit on drinks. Other side items have similar profit margins usually. Most of the profit that a fast food restaurant makes comes from these expensively priced items.

Conclusion

Now you know the answer to “how do fast food restaurants make money?” They keep their costs as low as possible (including paying their workers low salaries). Upsells are where their major profits lay. A lot of customers will go for them so they will always make good profits.