McDonald’s is set to introduce a $5 meal deal that may generate a modest profit, ranging between 1% and 5% per combo sold, translating to approximately $0.05 to $0.25. According to restaurant analyst Mark Kalinowski, this initiative aims to entice consumers who are feeling the effects of inflation back into the restaurants, with hopes that they will purchase additional items beyond the $5 offer.
However, the profitability of this deal hinges on various factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that while the $5 meal deal is designed to attract customers, it is more about promotion than actual profit.
The majority of McDonald’s locations, approximately 95%, are franchise-owned. This means franchise owners have the autonomy to set their own prices and navigate additional expenses such as rent, insurance, permits, and taxes. McDonald’s U.S. president Joe Erlinger mentioned in May that franchisees implement promotional offers like the $5 meal deal to manage overhead costs effectively.
Despite its potential to draw in diners, Spiegel labeled the meal deal as a “loss leader” aimed at capturing and retaining customers. Once the costs associated with labor, packaging, condiments, delivery, and marketing are considered, franchise owners could see little to no profit from the items included in this deal.