McDonald’s has introduced a $5 meal deal intended to attract customers back to its locations, particularly those feeling the pinch from rising inflation. While this initiative is likely to generate a modest profit margin of between 1% and 5%—translating to roughly $0.05 to $0.25 per sale—it may not significantly benefit franchise owners.
According to restaurant analyst Mark Kalinowski, the goal of the $5 combo meal is to draw consumers into the restaurant, encouraging them to purchase additional items. However, factors such as ingredient costs, labor, and overhead expenses will heavily influence the actual profitability of the deal.
Arlene Spiegel, president of Arlene Spiegel & Associates, referred to the meal deal as more of a promotional strategy than a lucrative option for franchisees. With approximately 95% of McDonald’s locations being franchise-owned, individual owners must manage their pricing and handle various expenses, including rent, insurance, and taxes.
Though promotional offers like the $5 meal deal are a way for franchisees to offset overhead costs, Spiegel notes that when additional costs such as labor, packaging, and marketing are taken into account, the profit margins are likely wiped out.
Despite the challenges, this initiative could be a call to action for McDonald’s, reinforcing its adaptability in a competitive market. By focusing on attracting customers through value-driven deals, the fast-food giant showcases its commitment to meeting consumer needs during tough economic times, which could benefit both the brand and the customers in the long run.
In summary, while the $5 meal deal may not yield significant profits for McDonald’s or its franchisees, it represents a strategic approach to engage customers and create opportunities for further purchases—highlighting the brand’s ongoing commitment to value during difficult economic conditions.