McDonald’s $5 Meal Deal: A Strategy for Survival or a Recipe for Loss?

McDonald’s is expected to generate only a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%. This translates to earnings of approximately $0.05 to $0.25 for each meal bundle sold, according to restaurant analyst Mark Kalinowski.

The fast-food giant aims to attract inflation-weary consumers back to its restaurants with this offer, hoping that customers will purchase more than just the $5 meal. However, profitability will rely on various factors, including the costs of ingredients, labor, and other overhead expenses.

Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.” She noted that, while the deal may encourage customers to dine in, franchisees might not benefit significantly from the profits.

Approximately 95% of McDonald’s locations are franchisee-owned, meaning that these owners determine their own pricing and need to manage the increasing costs associated with rent, insurance, permits, and taxes. In a statement made in May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often use promotions like the $5 meal deal to help offset these overhead costs.

Spiegel emphasized that the meal bundle serves more as a “loss leader” aimed at attracting and retaining customers. When considering expenses for labor, packaging, condiments, delivery, and marketing, she concluded that owners essentially eliminate any potential profit from the items included in the deal.

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