McDonald’s is set to introduce a $5 meal deal that may yield a modest profit margin between 1% and 5%, translating to approximately $0.05 to $0.25 per meal sold, as reported by restaurant analyst Mark Kalinowski.
This initiative aims to attract consumers who are feeling the pinch of inflation, encouraging them to visit McDonald’s and potentially spend more than just the amount for the meal deal. However, the profitability of this offer will hinge on several factors, including ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She pointed out that while the combo might entice customers back to the restaurants, franchise owners may not benefit from the increased sales. Approximately 95% of McDonald’s locations are franchise-operated, meaning these owners set their own pricing and manage various additional costs, such as rent and taxes.
In a statement from May, Joe Erlinger, president of McDonald’s USA, noted that franchisees frequently employ promotional offers like the $5 meal deal to help manage their overhead costs. Nevertheless, Spiegel emphasized that the deal serves more as a “loss leader” to attract customers, indicating that when labor, packaging, condiments, delivery fees, and marketing expenses are accounted for, franchise owners may eliminate any profit from this offering.