McDonald’s is likely to see only modest profits from its recently introduced $5 meal deal, with potential profit margins estimated between 1% and 5%. This translates to profits of approximately $0.05 to $0.25 for each meal combo sold, according to restaurant analyst Mark Kalinowski. The fast-food giant implemented this deal in an effort to attract consumers who are feeling the financial pinch of inflation, hoping that once customers are inside the store, they will be encouraged to purchase additional items.
However, whether the deal will be profitable depends on various factors including the costs associated with ingredients, labor, and other operational expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, points out that the $5 meal deal is more promotional than profitable.
Moreover, profits from this deal may not be fully realized by franchise owners. Approximately 95% of McDonald’s locations are franchisee-owned, which means these independent operators set prices and deal with their own overhead costs, such as rent, insurance, and taxes. Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often run promotional offers like the $5 deal to help offset their overhead, but this deal is viewed more as a strategy to attract customers rather than a reliable source of profit.
Considering all associated costs, including labor, packaging, condiments, delivery, and marketing, franchise owners might find that the meal deal ultimately leads to negligible profits or even losses on individual sales.
In summary, while McDonald’s $5 meal deal aims to draw in patrons amid economic challenges, the financial viability for franchisees and its effectiveness as a promotional strategy remain uncertain. Yet, this initiative could signal a positive move toward valuing customer experience and loyalty in challenging financial times. By focusing on attracting customers through affordability, McDonald’s may position itself for long-term success as consumer behaviors evolve.