McDonald’s is launching a $5 meal deal that is anticipated to yield a modest profit, ranging from 1% to 5%, which translates to approximately $0.05 to $0.25 for each combo sold. Restaurant analyst Mark Kalinowski notes that this offering is part of the fast food chain’s strategy to attract consumers who are feeling the pinch of inflation, with the hope that once customers are in the store, they will purchase additional items beyond the $5 meal.
However, the profitability of this deal is subject to various factors, including ingredient costs, labor expenses, and overheads. Arlene Spiegel, president of Arlene Spiegel & Associates, describes the meal deal as “more promotional than profitable,” emphasizing that while it may draw diners in, franchise owners might not see substantial profits due to their independent pricing and the additional expenses they incur, such as rent, insurance, and taxes.
It is important to note that approximately 95% of McDonald’s restaurants operate as franchises, which means that individual owners face unique financial challenges. In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchise owners often pursue promotional offers like the $5 meal to offset their overhead costs. Nonetheless, Spiegel points out that after accounting for expenses related to labor, packaging, condiments, delivery, and marketing, franchise owners might not benefit significantly from the deal.
Despite these challenges, McDonald’s $5 meal deal represents a proactive approach to drawing in customers during tough economic times, reflecting a commitment to meeting consumer needs. While profit margins may be slim, the strategy illustrates the company’s adaptability and determination to maintain its customer base.
In summary, the $5 meal deal is more of a promotional strategy aimed at increasing foot traffic in McDonald’s restaurants. While the financial upside for franchise owners may be limited, it highlights the brand’s efforts to remain appealing during inflationary pressures. Optimistically, this could lead to long-term customer loyalty, potentially increasing sales in the future.