McDonald’s is anticipated to see only a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to approximately $0.05 to $0.25 for each meal bundle sold. This information comes from restaurant analyst Mark Kalinowski, who believes that this initiative is part of McDonald’s strategy to attract price-sensitive customers amid ongoing economic pressures.
Kalinowski suggests that the $5 meal deal serves as a gateway for encouraging customers to return to McDonald’s restaurants, with hopes that once inside, they will purchase additional items beyond the introductory offer. However, the overall profitability of this deal hinges on several factors, including the fluctuating costs of ingredients, labor, and general overhead expenses.
According to Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, while the promotion may draw diners back, it is primarily designed to be a marketing tactic rather than a high-profit venture. Since approximately 95% of McDonald’s locations are franchisee-owned, each owner has the autonomy to set their own prices and must navigate various additional costs, such as rent, insurance, and taxes.
In the context of this promotional strategy, McDonald’s U.S. President Joe Erlinger noted that franchisees often implement promotions like the $5 meal deal to counteract these overhead costs. Although the meal deal is intended to attract customers, Spiegel emphasizes that, after accounting for the numerous associated expenses—such as labor, packaging, and marketing—franchisees may find their profit margins significantly diminished.
While challenges remain, the $5 meal deal can still be seen as an encouraging approach to re-establish customer loyalty and potentially expand profitability in the long run. By enticing customers through value-driven offers, McDonald’s may position itself for a stronger recovery once economic conditions stabilize, further benefitting franchisees in the future.