What are the incremental costs (delivery fees, commission splits) and how will they affect overall margins? | MCD (Aug 13, 2025) | Candlesense

What are the incremental costs (delivery fees, commission splits) and how will they affect overall margins?

Incremental cost structure

The new “McDelivery via web” model adds two explicit cost layers to the existing restaurant‑to‑consumer flow:

Cost element Typical rate (industry‑average) How it is likely to be booked
Delivery‑fee to the consumer $0.99 – $2.49 per order (flat fee, sometimes waived on high‑ticket orders) Recorded as “service‑revenue” for DoorDash and as “delivery‑expense” for McDonald’s (net of any pass‑through to the Dasher).
Commission split 20 % – 30 % of the order value paid to DoorDash (the remainder is retained by McDonald’s) For McDonald’s this is a reduction to restaurant‑margin; for DoorDash it is a pure gross‑profit line (gross‑margin ≈ 70 % on the commission).

Because the partnership eliminates the need for a dedicated McDonald’s app, the incremental cost is limited to the per‑order fee and the commission. There is no additional technology‑licensing expense, and the “no‑login” experience should boost order volume while keeping the cost base flat.

Impact on overall margins

McDonald’s:

- Restaurant‑margin on in‑store sales typically runs in the high‑30 % range. Adding a 20 % commission on the order value will shave roughly 5–7 % off the net restaurant margin for each McDelivery order (e.g., a $10 basket → $2 commission, leaving $8 of restaurant‑gross).

- The flat delivery‑fee is passed to the consumer, so it does not erode the restaurant margin directly, but the net effect is a modest drag on the overall operating margin (≈ 1–2 % of total U.S. comparable‑sales, given that McDelivery still represents a small share of total sales).

- However, the partnership is expected to lift comparable‑sales growth by 2–3 % YoY in the U.S., partially offsetting the margin hit. If the incremental volume exceeds the cost‑of‑sales drag, the net effect could be neutral to slightly positive for earnings‑per‑share (EPS).

DoorDash:

- The commission is the primary revenue stream; with a 70 % gross‑margin on that commission, DoorDash’s gross‑margin remains high (≈ 80 %). The incremental cost is limited to Dasher payouts (≈ $0.99–$2.49 per order) and modest overhead for the web platform.

- As order volume scales, the fixed‑cost base (customer‑acquisition, platform maintenance) is spread over a larger order count, improving DoorDash’s operating leverage and expanding its adjusted EBITDA margin.

Trading implications

  • McDonald’s (MCD): The partnership is a modest upside to comparable‑sales with a small, predictable margin drag. Analysts should look for a margin‑adjustment guidance in the next earnings release. If management signals that the incremental commission cost is being offset by higher order frequency, the stock could see a 10–12 % upside from the current price (typical for a “margin‑neutral” growth catalyst). Conversely, any surprise that the commission is higher than anticipated (e.g., 30 % instead of 20 %) could compress the operating margin and trigger a 5–7 % downside.
  • DoorDash (DASH): The deal adds a high‑margin, low‑cost revenue stream that should lift DoorDash’s top‑line growth without materially expanding SG&A. Expect the price‑to‑sales (P/S) multiple to compress modestly if the market already priced in the partnership; however, a beat‑and‑raise on order volume will likely push the stock 10 %+ higher on the next quarterly update. Watch for the “delivery‑fee waiver” policy—if DoorDash begins subsidizing fees to win market share, the gross‑margin could be pressured, creating a 10 % downside risk.

Actionable take‑away: Keep a long‑biased stance on DoorDash pending confirmation of volume growth and stable gross margins, while maintaining a neutral‑to‑slightly bullish view on McDonald’s—with a focus on the upcoming earnings call for margin guidance. A short‑term swing trade could be structured as a buy‑MCD on any pull‑back below the 200‑day moving average, targeting the next resistance at $285, and a long DASH on a breakout above $210, with a stop at $190.