McDonald’s is introducing a $5 meal deal, which is seen more as a promotional strategy rather than a significant profit generator. According to restaurant analyst Mark Kalinowski, the profit margins on this combo will likely be modest, ranging from 1% to 5%, equating to a profit of about $0.05 to $0.25 for each meal sold.
This initiative aims to attract consumers who are feeling the effects of inflation, encouraging them to visit McDonald’s restaurants with the hope that they will purchase additional items beyond the $5 deal. However, the profitability of this meal deal hinges on various factors, including fluctuations in ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the deal as “more promotional than profitable.” She highlighted that since approximately 95% of McDonald’s locations are franchise-owned, each franchisee has the autonomy to set their own prices and manage their own expenses, including rent, insurance, and taxes. This means that while the meal deal might drive traffic to restaurants, franchisees might not benefit financially due to the various costs associated with running their businesses.
Despite these challenges, the $5 meal deal serves as a tactic to “capture and re-capture guests,” further emphasizing that McDonald’s is focused on retaining customer loyalty in a competitive market. This initiative could be a positive step in fostering customer engagement and enhancing the overall dining experience.
In summary, while the $5 meal deal may not be a significant moneymaker for McDonald’s or its franchisees, it reflects the company’s strategic approach to attract budget-conscious customers and revitalize restaurant traffic.