McDonald’s has introduced a $5 meal deal that could yield a profit, albeit a modest one. According to restaurant analyst Mark Kalinowski, the fast food giant is expected to see a profit margin of between 1% and 5% on the deal, translating to roughly $0.05 to $0.25 for each bundle sold.
Kalinowski noted that this deal aims to attract consumers who are feeling the pinch of inflation and encourage them to make additional purchases while in the restaurant. However, achieving profitability will hinge on various factors, including the costs of ingredients, labor, and overheads.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, emphasized that the $5 meal deal is “more promotional than profitable.” She added that while the combo might draw customers back into McDonald’s locations, franchise owners might not see substantial profits from it. Approximately 95% of McDonald’s locations are franchisee-owned, meaning that franchisees have the autonomy to set their own prices and must contend with various expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often use promotional deals like the $5 meal to reduce those overhead costs. Nonetheless, Spiegel pointed out that the bundle functions more as a “loss leader to capture and re-capture guests.” When accounting for additional costs like labor, packaging, condiments, delivery fees, and marketing, she asserted that franchise owners often end up eliminating any potential profit from the items included in the deal.