McDonald’s is introducing a $5 meal deal that, while appealing to budget-conscious consumers, may only yield modest profits for the fast-food giant. According to restaurant analyst Mark Kalinowski, the potential profit margin for the combo meal is estimated to be between 1% and 5%. This equates to a profit of approximately $0.05 to $0.25 per meal sold.
Kalinowski suggests that this promotion is a strategy to attract customers who are feeling the pinch from inflation, with the intention of encouraging them to purchase additional items beyond the $5 meal. However, the profitability of this deal will be influenced by various factors, including ingredient costs, labor expenses, and overhead.
Arlene Spiegel, president of Arlene Spiegel & Associates, emphasized that while the deal could draw customers back into restaurants, it may not necessarily lead to increased profits for franchise owners. Given that about 95% of McDonald’s locations are franchise operations, the individual owners are responsible for setting their prices and managing costs such as rent, insurance, permits, and taxes.
Spiegel referred to the $5 meal deal as more of a “promotional” effort rather than a substantial profit generator. She pointed out that franchisees often use such promotions as “loss leaders,” designed to attract customers rather than ensure profitability on each sale. After accounting for various costs associated with the meal — including labor, packaging, condiments, delivery, and marketing — many franchisees may find that they are unable to achieve significant profits from these meal deals.
While the financial implications of this deal remain uncertain, it is a positive step for McDonald’s, indicating a willingness to adapt to consumer needs and preferences in a challenging economic landscape. By prioritizing customer satisfaction and engagement, McDonald’s aims to enhance its brand loyalty — a potentially valuable long-term strategy that may pay off in the future.
In summary, the $5 meal deal may present limited profitability but serves as a crucial marketing effort to revitalize customer interest amid economic challenges.