Charitable Giving Gets Smarter

I went to McD’s for a coffee the other day and they asked, “Would you like to contribute $1 to Ronald McDonald House and receive a coupon for a free small coffee?”

“Sure,” I said. That’s a no-brainer, right? Yes, from the charity’s POV.

Mickey D’s has a GPM (gross profit margin) on coffee of around 87% so their COGS (cost of goods sold) for a small coffee is probably–

$1 x (1-.87) = $0.13

This includes direct labor, cup, hot water and coffee grinds.

So for each dollar they raise for their charity, their cost is ~13 cents. It is similar to a self capitalization technique where firms issue script instead of paying for things in currency of the realm. More about script here, https://www.eqjournal.org/?p=3233.

From the consumer’s POV, this is essentially a costless way of giving to charity and makes a person feel like they’re doing something worthwhile too.

@ profbruce