McDonald’s is banking on its $5 meal deal to entice inflation-weary customers back into its restaurants, although the profit margins from this offering are expected to be quite modest. According to restaurant analyst Mark Kalinowski, the chain could see profit margins ranging between 1% and 5%, equating to just $0.05 to $0.25 for each bundle sold.
This strategic move aims not just to attract diners with a budget-friendly option, but also hopes to encourage them to purchase additional items once they are inside the store. However, achieving profitability with this deal will hinge on various factors such as ingredient costs, labor, and other operating expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, describes the $5 meal deal as “more promotional than profitable.” She cautions that even if it successfully brings customers into the restaurant, franchise owners—who operate roughly 95% of McDonald’s locations—set their own prices and must navigate local expenses like rent, insurance, and taxes.
As noted by McDonald’s U.S. president Joe Erlinger, franchisees often deploy promotional offers like the $5 meal to help alleviate overhead costs, but Spiegel argues this could lead to minimal or no profits for owners after accounting for additional expenses, including labor, packaging, and marketing.
In summary, while the $5 meal deal presents a strategic initiative to draw customers in during challenging economic times, the intricacies of overhead costs and profitability may complicate its financial success.
Looking forward, this initiative may still present an opportunity for McDonald’s. By creating attractive offers, the chain has the potential to cultivate customer loyalty, encouraging diners to return even after the promotion ends. This could foster long-term growth, outweighing the short-term modest profits from the meal deal.