McDonald’s is introducing a $5 meal deal that could yield modest profits, ranging from 1% to 5%, equating to about $0.05 to $0.25 per meal combo sold. According to restaurant analyst Mark Kalinowski, this strategy aims to attract inflation-strained consumers back into their locations with the hope that they will purchase additional items beyond the economical meal deal.
However, the profitability of this offering is influenced by various factors, including ingredient prices, labor costs, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, describes the deal more as a promotion rather than a significant revenue generator. She explains that while the meal deal might entice customers, it does not guarantee profits for franchisees, who own approximately 95% of McDonald’s locations. These franchise operators set their own prices and bear the burden of extra costs, such as rent and insurance.
McDonald’s U.S. president Joe Erlinger indicated that franchisees utilize promotional offers, like the $5 deal, to help offset their operating expenses. Nevertheless, due to the significant costs of labor, packaging, and marketing, Spiegel notes that franchise owners may find their profits virtually wiped out when accounting for these expenses.
As consumers continue to adapt to rising costs, McDonald’s promotional strategy shows promise in revitalizing customer interest. It highlights the fast food chain’s commitment to providing affordable dining options, ultimately paving the way for long-term customer loyalty and increased foot traffic in the future. By positioning itself as a budget-friendly choice, McDonald’s can remain a relevant player in a competitive fast-food market.