McDonald’s is currently facing its first lawsuit related to the recent E. coli outbreak associated with its Quarter Pounder. Despite the legal challenges, the fast-food chain may still see a small profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%. According to restaurant analyst Mark Kalinowski, this translates to earnings of approximately $0.05 to $0.25 for each meal bundle sold.
The $5 meal deal is seen as a strategy to attract inflation-weary consumers back to McDonald’s restaurants, encouraging them to purchase more than just the promotional offer. However, whether this deal will be truly profitable is contingent upon various factors, including ingredient costs, labor expenses, and other overheads.
Arlene Spiegel, president of Arlene Spiegel & Associates, indicated that the meal deal is more of a promotional strategy than a profitable venture. She noted that even if the deal succeeds in bringing customers into the restaurants, franchise owners may not benefit from the profits due to the high costs they must manage, including rent, insurance, permits, and taxes.
As reported by McDonald’s U.S. president Joe Erlinger, franchisees often implement promotional offers like the $5 meal deal to help offset overhead costs. However, Spiegel emphasized that these offers often function as “loss leaders” designed to attract and retain customers rather than generate significant profits. Once additional costs such as labor, packaging, condiments, delivery fees, and marketing are considered, franchise owners often find that they are not making a profit on these deals.