McDonald’s is betting on its $5 meal deal to attract customers who are grappling with inflation, though any gains from this strategy are expected to be modest. According to restaurant analyst Mark Kalinowski, the profit margin on this combo meal could range from 1% to 5%, translating to about $0.05 to $0.25 for each meal sold.
The promotional move aims to draw inflation-weary customers back into McDonald’s restaurants, with the hope that once inside, they will spend more than just on the discounted meal. However, the potential for profitability hinges on several variables, including the costs of ingredients, labor, and general overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.” Although it might encourage diners to return, it does not guarantee profits for franchise owners, who account for approximately 95% of McDonald’s locations and operate with their own price structures while managing additional expenses such as rent and insurance.
In light of these factors, the bundle serves primarily as a “loss leader” aimed at drawing customers back into the restaurant, but the accumulated costs of labor, packaging, and marketing could diminish any possible profits significantly.
In conclusion, while the $5 meal deal is a strategic move for McDonald’s to regain customer interest, the actual profitability will largely depend on how franchise owners navigate their individual operational costs. This strategy highlights the fast food giant’s responsiveness to consumer needs amidst challenging economic conditions, offering a glimmer of hope for revitalizing customer engagement during tough times.