McDonald’s $5 Meal Deal: A Strategic Gamble or a Recipe for Loss?

McDonald’s is set to benefit modestly from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to approximately $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski. This promotional pricing strategy aims to attract consumers who are feeling the effects of inflation, encouraging them to purchase more than just the $5 offering once they visit the restaurant.

However, the chain’s ability to turn a profit hinges on several factors, including the costs of ingredients, labor, and overall operational expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, noted that the meal deal is “more promotional than profitable.”

Despite the potential to draw diners back into McDonald’s locations, franchisees may not necessarily benefit from these profits. Approximately 95% of McDonald’s outlets are franchise-owned, meaning that individual owners establish their prices and manage additional expenses such as rent, insurance, permits, and taxes.

Joe Erlinger, McDonald’s U.S. president, indicated that franchisees often attempt to offset overhead costs with promotional offers like the $5 meal deal. Nonetheless, according to Spiegel, the bundle acts more as a “loss leader,” aimed at attracting and retaining customers. Factoring in costs related to labor, packaging, condiments, delivery, and marketing, she expressed that franchise owners likely end up losing any potential profit from the items in the deal.

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