Subscribe
Share
Share
Embed
Tyler and Steve have a McDonald’s…problem? And Steve dives into the numbers to figure it out.
Along the way, they discover the value of McDonald’s rewards points, what lessons Tyler learned from how McDonald’s prices different sizes of fries, and how to run what-if scenarios.
Links:
- (00:00) - Another weird spreadsheet
- (01:40) - Different prices at different McDonald's locations
- (04:09) - How much are the points worth?
- (07:37) - "Optimal" ways to spend points
- (10:38) - Using McDonald's pricing as a model
- (16:28) - What-if scenarios
Links:
---
Steve Nay:
Tyler Smith:
Creators & Guests
What is It's Not About The Money?
Solopreneurs and small business owners: learn about leadership, operations, entrepreneurship, productivity, taxes, client creation, marketing, bookkeeping, and more.
Steve: So, Tyler, you
remember, uh, episode like 18?
This is like half of the
lifetime of the podcast to go.
But, but,
Tyler: Oh yes.
The Dark Ages.
Steve: the episode called Optionality.
And, uh, it, uh, in the cold open, I
asked you if you had any like weird
things that you use spreadsheets for,
Tyler: Yeah.
Steve: Uh, and, and, uh, my example
was not actually super weird.
It was like keeping track of
my utilities or something.
But I came up
Tyler: Yeah.
Neither was mine.
Neither was mine.
Steve: I came up with a, uh, a weirder
one, more esoteric, that's also kind of
silly, and it's McDonald's Rewards Points.
Can we talk about that?
Today.
Tyler: Oh, Steve, we
have to talk about that.
I love McDonald's and their reward points.
Steve: All right, let's do it.
Hello there, dear listener.
I am Steve.
Tyler: And I'm Tyler.
And welcome to another episode
of It's Not About The Money.
It's about the points, the podcast where
we help you gain the clarity you need
to run a successful small business.
Steve: Tyler has a financial coaching
practice, and I run a tax business.
We are both small business owners
like you, and this podcast is our
exploration of entrepreneurship,
one episode at a time.
Alright, alright,
Tyler: we're talking about McDonald's.
Steve: So, McDonald's has an app,
and if you place the order in the
app, or if you like, give them the
code when you're in the drive thru,
whatever, you can accumulate points.
And these Points are eventually,
perhaps, worth something.
Tyler: Oh, I'm familiar, Steve.
Steve: Okay, so, so the other day I got
curious because it's like, uh, hello,
you have, you have, uh, you know, how
are many points, I forget the number,
expiring at the end of the month.
And so that, uh, triggers my brain
of, Oh, I got, I gotta go spend these
points before I lose them, you know,
because, you know, what are they?
They're, they're made up internet points,
but they are actually worth something.
And so I was curious, like,
How much are these worth?
Okay, so I go into the, I open up a,
a spreadsheet because I'm a numbers
geek, and so this is what I do.
And, there's a selection of, like
common items that you can buy
for certain fixed point values.
Like a McChicken is, is 1500 points
and a cheeseburger is 1500, and
they go all the way up to like
a, a full happy meal is 6,000.
So then, I got that, so, the, the,
the item in the first column, point
cost in the second column, then I went
through, like, the four McDonald'ss
that are closest to me, and I added
all of these things to the cart, and
then switched the location between
them all, and wrote down the prices.
Tyler: And they were different.
Steve: yeah, they're different.
Uh, that also surprised me.
Uh, like, the one inside the
Walmart is the most expensive.
Tyler: Interesting.
Steve: a, there's like an 8 difference
between, if you bought one of each
of all of these items, between the
cheapest one and the most expensive.
Franchise $8 difference.
Fascinating
Tyler: There's like a couple reasons
that's interesting to me and one of those
is I I've noticed I mean I've never made a
spreadsheet about this or thought too much
about it But I pretty much order the same
thing almost every time I go to McDonald's
and it often is a different total when I
check out and I've always thought that's
kind of weird like are they doing uh, It'd
be interesting to learn more about this
like um, Like what are their pricing model
is like does it depend on the time of day?
Like, do they have surge
pricing, like Uber?
I'm so, I have so many
Steve: Oh yeah.
I,
Tyler: I have no
Steve: know.
These are all questions we can answer
with, uh, enough crowdsourcing of the, uh,
the data and a large enough spreadsheet.
Tyler: Oh my
Steve: It probably also depends
on the franchisee as well,
because, uh, very few of the
McDonald's locations and probably
none of the ones around me are
owned by McDonald's corporate.
Tyler: Right.
Steve: They're all franchised.
Tyler: And some of the deals that
I see available in the app, um,
are only available in certain
locations on certain days as well.
So who knows what's going on in the AI.
And the algorithm of McDonald's.
Anyway.
Okay.
Sorry.
That was a distraction.
Go back to your
Steve: so we got all those prices,
and then, uh, I made a column after
that that's called the average cost.
So just, like, across all of
these four locations, because I
go to all of them, and it just
depends on the day, but whatever.
Make the average, uh,
the, the arithmetic mean.
And then, uh, The thing that I wanted to
know is how much are the points worth?
How much is each point worth?
Tyler: Like in US dollars, basically.
Okay.
Steve: So I take the
point cost for each row.
So the McChicken is 1, 500 points.
The average cost is 1.
99.
Divide 99.
That's, that's, uh, 0.
133 cents per point.
Tyler: or okay.
Cents 0.
133 cents.
So really,
Steve: a tenth of a cent, and they,
and they're all, like, the, the average
here is they're about a tenth of a cent.
Were you gonna say something else?
Tyler: no, I'm just marveling at
your dedication to this question.
Steve: Okay.
So, we have that piece of information now.
My second question was, uh, are
some of these items a better deal
to buy with points than others?
And the answer to that is yes, uh,
let's see, the one that has the highest
average point value is the cheeseburger,
actually, which costs 1500 points,
but its average cost near me is $2.14.
Which you'll recall is higher
than the McChicken at 1.
99.
And so that makes the
average point value 0.
143 cents.
Tyler: Oh my goodness.
Steve: So if you're trying to, uh,
Tyler: Sorry, this is amazing.
Steve: optimize the, uh, the dollar
value you're getting out of your
points, the cheeseburger for me at the
moment, uh, looks like the best deal.
Tyler: Okay.
So I, uh, I'm thinking right now of a
few members of my family who need to
be, to, to receive this information
because that's actually what they
get every time is a cheeseburger.
Steve: Oh, well, there you go.
Tyler: but I would have to do
the same math, I guess, for
my area too, because I'm in a
different state, different locale.
Who knows?
Steve: I would be interested to know
if it is different or if, or if like
this, uh, general trend holds, even
if the prices are slightly different.
Tyler: mean, I could do it.
I have a lot.
Yeah, too much experience
with McDonald's app.
I'm not committing to you, Steve,
though.
I'm not committing to do this, but
I'm, you know, it could happen.
Steve: Another thing that was
interesting is that it, it wasn't,
like, it wasn't uniform across all
of the items for the more expensive
versus the less expensive locations.
Like, some of the items are a little bit
more, and some are a little bit less.
So, there's, there does some,
seem, seem to be some pricing
magic going on in there.
Tyler: Yeah, that's fascinating.
Some of these price
differences are pretty big.
Like the Happy Meal.
Steve: The Happy Meal is a big one.
Like, it can, it could be 6.
79, or it could be 4.
69.
Tyler: Yeah, that's wild.
Steve: For a, that was like a six piece.
McNugget, I think.
I just did the most expensive Happy Meal.
Tyler: Oh, okay.
So there's different kinds of Happy Meals.
That's a good point.
That's a good point.
I was like, my mind was off to the races.
It was like, okay, is it because
kids, people take their kids shopping
with them at Walmart and so they
have to walk past the McDonald's so
there's like supply and demand and
Steve: That, that thought
had crossed my mind, yeah.
Tyler: whew, I mean.
Okay, so this is interesting because
even though you've found the optimal
way to spend points in terms of getting
your money's worth, we're talking
about very small amounts of difference,
tenths or less of a cent, right?
So I don't need to have
anxiety about this, probably,
Steve: no, no, no.
Tyler: when I'm deciding
what to spend my points on.
Steve: Right.
Like another question that, uh,
I've been interested to answer,
but have not yet done run the
numbers for is like, how does, how
does using points or using deals?
We haven't even talked about deals
in the McDonald's app yet, but
like the deals are another thing.
Like how does, uh, using one of those
affect the total cart value for a meal?
Tyler: yeah,
Steve: If I get the.
The cheeseburger for 1500 points, but
then I also buy fries and a drink.
Would it have been better for
me to do the like 20 percent
off everything over 5 thing
instead?
Tyler: Yeah.
And of course, uh, at least
this is how it is where I'm at.
I assume it's probably universal, but
they limit you to using either one deal
or one points redemption per order.
Steve: Mm hmm.
Tyler: Or maybe that I know
of, maybe it's per day.
Like, could you do multiple orders and
drive through the drive thru a few times?
This is getting kind of crazy.
Steve: uh, you can.
And, uh, I have done that
Tyler: Steve.
Steve: on, no, it was, it was, no, it
was, it wasn't the same McDonald's.
It was like, I was on
the, on a drive home.
So I got like the, the McChicken here.
And then I got, uh, uh, an ice
cream cone later or something,
Tyler: Okay.
Okay.
Okay.
That's amazing.
I love, this is, this is my
favorite episode already.
And I, I'm obsessed with this.
Yeah, I, um, so I've had a much less
robust way of testing this out myself.
Um, if our listeners haven't
figured this out by this point in
the episode, well, they're going to
know now I go to McDonald's a lot.
Okay.
Apparently so does Steve, but, um,
like I've noticed, you know, I,
my, my typical order is usually
like a McDouble and a large fry.
And depending on the deals that
they have available that day,
I've gone back and forth on, cause
they have a deal often around me.
It's like a large fry for
1, which is normally like 3.
50 or thereabouts.
Or, um, another one that's like
20 percent off any order over 5.
Anyway.
And so all I do is like, I try
both versions in the app and
see which one costs the least.
It takes a little bit more time.
There's no spreadsheet involved anyway,
Steve: you're getting the
real time prices, which
Tyler: but I'm getting the real
time prices.
Steve: might, might be
different every time.
Tyler: That's true.
And actually that particular order, I
don't even think it adds up to over 5.
So I think that must
be what I'm splurging.
Cause, uh, sometimes I like
to get a quarter pounder.
Instead of a McDouble, if
I'm feeling kind of bougie,
Steve: Yeah
Tyler: you know, which is more
expensive, quite a bit more expensive.
Uh, anyway, this is now
sounding like a confessional.
I don't know, but
Steve: Yeah, if he should we relate this
to business somehow I mean I had some
some thoughts or we could just leave it
Tyler: I mean, I was just wondering
if we should relate it to weight loss
because unbelieve, so I eat at McDonald's
a lot, but it's actually like kind
of part of my, uh, this is so weird.
It's part of my current health plan.
Believe it or not.
Oh, let's just say I fit it in the budget.
Uh, I just like that they have all
the calorie amounts like listed out.
So it's very easy to.
Track how much you're eating, even
if it's not the best quality food.
Steve: Mm hmm
Tyler: about nutritional advice.
And no one should take that as
advice, but that is what I'm doing.
So look for the documentary.
Steve: Right
Tyler: Uh, yeah, how, I mean, we could
try to relate this to our businesses.
I, uh, actually I, you know, there
is a direct tie in because early on
in my coaching practice, when I was
trying to figure out how on earth to
price my services, I actually went to
the McDonald's app and I looked at the
prices for small, medium, and large
french fries, because I had heard
that there's like a psychology, right?
If like you have a, you have three
options, kind of a low price point,
a high price point and a middle one.
And most people will
choose the middle one.
This kind of, you know, you
hear about these pricing strategies and
I actually like put in a spreadsheet.
Steve: Ah There
Tyler: the ratios between the
prices of the small, medium, and
the large, and tried to like come
up with a, uh, you know, I tried to
model my, this was a long time ago.
Okay.
I've moved away from this.
I actually never implemented it, but
I tried to model my, my pack coaching
package pricing off of the same ratios
for like McDonald's French fries.
Oh
Steve: Okay.
Well, no, that's interesting.
It's it It's because I just read
a, an email from Ryan Lazanus,
who's a accounting firm runner,
and he talks a lot about pricing
and, uh, oh, I think it was him.
Anyway, uh, he does the pricing, uh,
in three tiers, like you described,
but the second tier is not like,
the price is not right in the
middle between the low and the high.
It's like pretty close to the high
tier because he would rather, uh,
that clients choose the highest one.
And if the value looks like, oh, well
it's only, you know, it's only 50 more a
month or something to get the, you know,
whatever the price is to get the highest.
Cause I, I know I want the
middle one at least, not the,
not the lowest one, but it's
only, it's a little bit
more to get the highest one.
Let's just go with that.
It's like you go to the movie theater
and, uh, uh, like a small Coke is, um,
is what 3 something and a medium is 4.
50 and a large is 4.
60.
And you're like, why would I get a medium?
Except, except that that's
all the soda I want.
So I'm going to get a medium, but
Tyler: Yeah, that's what it was.
Sorry, I couldn't remember.
Yeah, it's been a while since I've thought
about this, but that's exactly right.
So I figured if anyone knew what
they were doing with pricing, it
would be McDonald's, so why not
model myself after them, right?
Um, I found the spreadsheet that I used.
I just happened to pull it up.
So, uh, it's not a dedicated spreadsheet.
This is in my spreadsheet that is
called When You Need A Spreadsheet,
Steve: Uh
Tyler: I just kind of use as
like a scratchpad for solving
random questions like this.
So yeah, I've got the small fries at 1.
99, the medium fries at 2.
29, and the large fries at 3.
19.
This would have been, like, last year.
I don't know if this has changed since
then or whatever, but Yeah, and then
I basically just figured out like
some multipliers and like scaled it up
Steve: Okay.
Tyler: from french fries
to coaching packages
Steve: Yeah.
Fascinating.
Tyler: This is probably this is like a
very indirect way of getting at the like
other than instead of like trying to
understand the psychology The math this
is basically copying someone else and
hoping that it's a good strategy again.
I did not end up going with this
I don't even have a small medium
large packages anymore, but I
thought it was worth throwing out
there since You know McDonald's.
Steve: Right.
And pricing is, uh, for me, at
least has been a, a long running
experiment of trying to figure
out what my pricing should be.
And so, you know, I think it's
useful to look at examples of
like, how does McDonald's do it?
How do other accounting firms do it?
How do other coaches do it?
That kind of thing.
And you have to find your own path,
but the, those folks know something and
maybe something that you don't know yet.
And so it's, it
can be
Tyler: for
sure.
Steve: Lean on them, get ideas from them.
Tyler: You know, I've been using
the McDonald's app for a long time.
Speaking of how much they know, but,
uh, I think I actually texted you when
this happened to me for the first time.
And I can't, it must've
been a year or two ago.
I don't know.
They haven't always done it, or maybe
you have to spend a certain amount with
them for this to happen or whatever.
But I got like a, your
McDonald's year in review email
one time.
And I was like, no, no, no,
no, no, no, no, no, no, no, no.
Like, I am not that person.
This cannot be happening.
Uh, so they do.
Yeah.
And now I've gotten several since then.
So it must not be like a year interview.
Sometimes it's like a month.
I need to pay more attention to this, but
I just remember, I'm like, well, I'm just
going to delete that email real quick
and pretend like I don't have a problem,
Steve: Okay.
Tyler: but they know my habits.
Yes, they do.
So, and you know, if they wanted to,
I mean, I don't know how, this is all
speculation just to be clear, but I
mean, they could probably learn your
habits and do customized pricing.
I've heard of that as a model.
You know, where, where companies
know about your rough, uh, you
know, demographically, like what is
your income level and maybe offer
different pricing based on that.
I don't know if that's like confirmed
or something that I just heard
on the internet, but let's hope
McDonald's doesn't go that way.
Steve: Right.
I think it'd be a little harder
for them to get away with that
because the prices are posted
there on the menu as you drive up.
Tyler: Right.
Steve: Okay.
Well, one other potential tie in is
the idea of running what if scenarios
of like forecasting things like this
can be useful in cashflow forecasting
for your business where like, you may
not know what it's going to look like
a year from now, but you can make
some assumptions and like play out
a few scenarios and see what would
happen if like this and this is true.
What would that look like?
And then let's switch those variables.
If this and this, and this
happens, what would that look like?
And that can kind of give you some,
points to triangulate, uh, and, and
match that up against your goals to
see is, if I keep doing these things,
will that get me where I want to,
or do I need to change something?
Tyler: I feel like there's a deeper
message in here too, which is, Steve, if
we keep doing these things and by these
things, I mean, eating at McDonald's,
will that get us where we want to be?
Steve: Uh huh.
Tyler: For now, for me, the answer is yes.
So, um, and now that's on the record.
Oh,
Steve: They, they first drew me in with
the, uh, the like 1 breakfast sandwich.
Uh, deal, uh, is probably
a couple years ago now.
They don't have it anymore, but,
cause you could get the breakfast
sandwich for a dollar, and then
a coffee for whatever amount.
Couple dollars.
Uh, and then there's your breakfast.
On the way to work.
Tyler: It's, it's unbelievably convenient.
I just love, uh, doing
the curbside pickup too.
This is now turning into an old, an ode
to McDonald's, but like, you know, I'm,
I'm at the place I'm going to be going
from where I am home around lunchtime.
Typically it's like the dog park.
I've taken my dog out
for lunch or something.
I can just punch in my order
as I'm getting in my car.
I just park in the parking spot.
They bring me the food.
I go home.
It's amazing.
I know a lot of places do this,
but, you know, this is, this
is, this is the one that I use.
Steve: Mm hmm.
Tyler: And it's always so
fast and so convenient.
Uh, here's a question for you.
You listed like four
McDonald's on the spreadsheet.
Are they somewhat
equidistant from your house?
And what determines which one you go to?
Steve: They are roughly equidistant, yeah.
And it just depends which
direction I'm going.
Uh, if I'm going into this
town or the other town.
I'm kind of, like, in a, in a suburb
out between a bunch of towns, so.
Yeah, it just depends what
else I'm doing on that errand.
Tyler: So here's a conundrum I have.
I used to live like four to six
minutes from the closest McDonald's.
And that was bad enough.
Then they built one across the street.
Steve: Oh,
Tyler: But it turns out I actually more
often go to the one that's a little
bit further away still just because
it's like on the way to and from so
many places compared to the other one.
So it's kind of interesting,
but I should buy McDonald's stock.
If I spend as much on their
stock as I did on their food,
uh, anyway,
Steve: This is not investing advice
Tyler: no.
Steve: Don't take health advice
or investing advice from us.
Tyler: Well, Steve, thanks for sharing.
I think this is a really,
really fun spreadsheet story.
And, um, I want to know, I guess, is this
going to change your behavior at all?
Like, have you learned anything
through this experience that is going
to modify your orders or how you
use the app or anything like that?
Steve: That is a good question.
I don't, I don't know.
Tyler: I mean, if not,
that's totally fine.
Cause you never know what the
heart wants when you're hungry.
So.
Steve: well, yeah, fair enough.
At the moment, not yet, but, I may, uh,
run like some what if scenarios and that
might change things, but yeah, like you
say, it's, I want a Filet O Fish today,
so that's, I'm going to get that, whether
it's, whether it's the, uh, biggest bang
for your buck on the point value or not.
Tyler: All right.
Well, thanks for coming with
us on this, uh, very revelatory
journey about McDonald's.
Steve: You can email us
hello at notaboutmoney.
com and we'll see you
again on another episode.