McDonald’s $5 Meal Deal: A Strategy for Customers or Profit Loss?

McDonald’s is anticipated to generate a modest profit from its $5 meal deal, with profit margins expected to range between 1% and 5%. This translates to approximately $0.05 to $0.25 for each combo sold, as noted by restaurant analyst Mark Kalinowski.

Kalinowski explained that this promotional offer aims to attract budget-conscious consumers back to McDonald’s, encouraging them to make additional purchases beyond the $5 deal. However, the actual profitability of this meal deal relies on various factors, including ingredient costs and overall operational expenses.

Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.” She cautioned that while the deal might successfully draw customers into the restaurant, it does not necessarily ensure profits for franchise owners.

Approximately 95% of McDonald’s locations are franchise-operated, allowing franchisees to establish their own prices while bearing costs associated with rent, insurance, permits, and taxes. In May, McDonald’s U.S. president Joe Erlinger highlighted that franchisees often use promotional strategies, like the $5 meal deal, to help offset overhead costs.

Spiegel further indicated that the meal deal acts primarily as a “loss leader” to attract customers. With the additional expenses related to labor, packaging, condiments, delivery, and marketing, franchise owners could potentially eliminate any profit from the items included in the deal.

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