McDonald’s is set to introduce a $5 meal deal that may yield modest profits for the fast-food giant. According to restaurant analyst Mark Kalinowski, the profit margin for this combo is anticipated to range between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold.
This initiative aims to attract inflation-burdened consumers back to the restaurant, with the expectation that while they purchase the $5 meal, they may also opt for additional items. However, the profitability of this deal hinges on various factors including ingredient, labor, and overhead costs.
Arlene Spiegel, president of Arlene Spiegel & Associates, remarked that the $5 deal is likely to serve more as a promotional tactic than a source of profit. While it may draw diners in, franchisees might not see these profits since around 95% of McDonald’s locations are owned by franchisees who set their own pricing and must manage expenses such as rent, insurance, and taxes.
In comments made by Joe Erlinger, McDonald’s U.S. president, he noted that franchisees often implement promotional offerings like the $5 meal deal to help offset overhead costs. However, Spiegel emphasized that when factoring in additional expenses, including labor, packaging, condiments, delivery fees, and marketing, franchise owners effectively erase any potential profit from these promotions.