McDonald’s is rolling out a $5 meal deal that, while aimed at attracting inflation-weary customers, is projected to yield only modest profits for the fast-food giant. Analyst Mark Kalinowski estimates that the profit margin on this combo may range from just 1% to 5%, translating to a profit of $0.05 to $0.25 for each bundle sold.
According to Arlene Spiegel of Arlene Spiegel & Associates, this offering serves more as a promotional effort than a significant revenue generator. The intent behind this deal is to entice customers back into McDonald’s locations, with the hope that they will purchase additional items beyond the meal deal.
However, whether this strategy proves profitable is contingent upon several factors, including the costs associated with ingredients, labor, and other operational expenses. With around 95% of McDonald’s locations being franchise-owned, these business owners have the autonomy to set their own pricing and are responsible for managing additional costs like rent, insurance, and taxes.
Franchisees are often pushed to run such promotions to offset their overhead costs, yet the complexities involved often leave limited room for profit. Once essential expenses, including labor and marketing, are factored in, many franchise owners may find that the promotional meals result in negligible or no profits.
In summary, while McDonald’s $5 meal deal is a strategic move to revive sales in a challenging economic climate, it poses significant challenges in terms of profitability for franchise owners. However, this could also spark a renewed customer interest in the brand, paving the way for increased foot traffic and sales across the board, as more customers may be tempted to explore McDonald’s broader menu offerings.