McDonald’s is facing its first lawsuit related to the E. coli outbreak linked to its Quarter Pounder. Despite the challenges, the fast food giant is trying to attract customers through a $5 meal deal, which is expected to yield a modest profit margin of between 1% and 5%. This translates to approximately $0.05 to $0.25 per meal sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the promotion aims to entice budget-conscious consumers who have been affected by inflation, encouraging them to purchase more than just the $5 meal. However, profitability will depend on various factors, including ingredients, labor, and overhead costs.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She emphasized that while the deal may bring customers back to McDonald’s, it doesn’t guarantee profits for franchisees. With around 95% of McDonald’s locations being franchise-operated, owners are tasked with setting their own prices and managing increased costs associated with rent, insurance, permits, and taxes.
In a previous statement, McDonald’s U.S. president Joe Erlinger indicated franchisees often use promotional deals to help offset overhead expenses. However, Spiegel cautioned that the deal serves largely as a “loss leader” to attract and retain customers. Once additional costs such as labor, packaging, condiments, delivery, and marketing are considered, franchise owners may find that their profits on the deal are nearly erased.