McDonald’s $5 Meal Deal: Promotion or Profit?

McDonald’s is poised to generate a profit from its $5 meal deal, albeit a modest one. According to restaurant analyst Mark Kalinowski, the fast food giant is expected to experience a profit margin from this combo in the range of 1% to 5%, translating to approximately $0.05 to $0.25 per bundle sold.

Kalinowski noted that the promotion aims to attract inflation-weary consumers back to McDonald’s, hoping that once inside, they will purchase additional items beyond the $5 deal. However, the profitability of this offer is contingent on various factors, including ingredient costs, labor, and overhead expenses.

Arlene Spiegel, president of Arlene Spiegel & Associates, emphasized that the $5 meal deal is “more promotional than profitable.” She added that while the deal may entice customers, franchisees might not benefit significantly from these profits. Approximately 95% of McDonald’s locations are owned by franchisees, who set their own prices and manage additional expenses such as rent, insurance, permits, and taxes.

In May, Joe Erlinger, president of McDonald’s U.S., indicated that franchisees often implement promotional offers like the $5 meal deal to offset their overhead costs. Nevertheless, Spiegel remarked that the bundle functions primarily as a “loss leader” to attract and retain customers. When taking into account the additional costs for labor, packaging, condiments, delivery charges, and marketing, franchise owners often end up with little to no profit from the items included in the deal.

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