McDonald’s has introduced a $5 meal deal that may yield a modest profit for the fast food giant. According to restaurant analyst Mark Kalinowski, the profit margin for this offering is expected to be between 1% and 5%, translating to roughly $0.05 to $0.25 earned on each combo sold.
Kalinowski noted that the promotion aims to attract consumers who are feeling the pinch of inflation, with the goal of encouraging them to purchase additional items beyond the $5 deal once they are in the restaurant.
However, the potential for profitability is influenced by various factors, including the costs of ingredients, labor, and overall operational expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, emphasized that the $5 meal deal is more about attracting customers than generating significant profits.
It’s important to note that about 95% of McDonald’s locations are franchise-owned. This means franchisees have the autonomy to set their own prices and manage their unique expenses, such as rent, insurance, permits, and taxes.
In comments made in May, Joe Erlinger, president of McDonald’s U.S. operations, mentioned that franchisees often implement promotional deals like the $5 meal to help manage their overhead costs. Nonetheless, Spiegel cautioned that while the meal deal might draw in customers, when accounting for various expenses—including labor, packaging, condiments, delivery fees, and marketing—a significant portion of any profits from this deal may be eroded.