McDonald’s is set to introduce a $5 meal deal, expected to yield only a modest profit margin ranging between 1% and 5%. This translates to earnings of approximately $0.05 to $0.25 for each combo sold, as noted by restaurant analyst Mark Kalinowski.
This promotional strategy aims to attract inflation-burdened consumers back to the restaurant, with the hope that visitors will purchase more than just the $5 meal. However, profitability hinges on various factors, including the cost of ingredients, labor, and other operational expenses.
Consultant Arlene Spiegel described the offer as “more promotional than profitable.” She highlighted that while the meal deal may succeed in drawing customers, franchise owners might not necessarily benefit from the modest profits.
Approximately 95% of McDonald’s locations are franchise-owned, which allows these owners to set their own prices but also places the burden of added expenses such as rent, insurance, permits, and taxes on them. In May, Joe Erlinger, McDonald’s U.S. president, noted that franchisees often implement promotional offers like the $5 meal deal as a way to offset their overhead costs.
Despite this strategy, Spiegel classified the meal deal as a “loss leader,” aimed at attracting and retaining customers. When considering various costs associated with labor, packaging, condiments, delivery, and marketing, she indicated that franchise owners may essentially eliminate any profitability from the items included in the deal.