McDonald’s is aiming to boost foot traffic with its $5 meal deal, though the profit margins from this offering are expected to be slim. Restaurant analyst Mark Kalinowski predicts profit margins could range between 1% and 5%, equating to roughly $0.05 to $0.25 per meal sold. This move appears to be part of McDonald’s strategy to attract consumers who have been impacted by inflation.
The $5 meal deal, while attracting customers, serves more as a promotional tactic rather than a significant profit driver. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that while the deal could entice diners back into the restaurant, franchise owners may not see substantial profits. Given that approximately 95% of McDonald’s locations are franchise-owned, each owner sets their own pricing and manages overhead costs, such as rent and insurance.
Promotions like the $5 meal deal are meant to offset these overhead costs, but they still operate as a “loss leader,” a strategy designed more to attract guests than to yield profits. After accounting for labor, packaging, and other expenses, many franchise owners may find that the deal significantly diminishes profits.
While the $5 meal deal represents a tactical response to economic challenges, it carries risks for profit margins. However, the potential to draw in customers and encourage them to explore additional menu items could lead to long-term benefits for McDonald’s.
Overall, McDonald’s approach illustrates the fast-food giant’s resilience in navigating economic pressures by adapting its marketing strategies to meet consumer needs, a hopeful sign of their commitment to remain relevant in times of economic uncertainty.