McDonald’s is navigating its first lawsuit related to the E. coli outbreak linked to its Quarter Pounder, while also focusing on a new $5 meal deal that may yield only modest profits. According to restaurant analyst Mark Kalinowski, the fast food giant anticipates a profit margin on the combo meal ranging from 1% to 5%, translating to approximately $0.05 to $0.25 for each meal sold.
This $5 meal deal is part of McDonald’s strategy to attract price-sensitive consumers who have been affected by inflation. Once customers are drawn into the restaurant, the hope is they will purchase additional items beyond the special offering. However, overall profitability from the deal hinges on several factors, including the ongoing costs of ingredients, labor, and overhead.
Consulting firm president Arlene Spiegel characterized the $5 meal deal as “more promotional than profitable,” suggesting that while it may draw diners back, it does not guarantee profit for franchiseowners. With approximately 95% of McDonald’s locations being franchise-operated, individual owners are responsible for pricing and must manage extra expenses like rent, insurance, permits, and taxes.
Joe Erlinger, the U.S. president of McDonald’s, noted in May that franchisees often implement promotional deals like the $5 offering to help offset overhead costs. However, Spiegel emphasized that these deals often serve as a “loss leader” intended to attract and retain customers. When additional costs such as labor, packaging, condiments, delivery fees, and marketing are taken into account, franchise owners may find that they eliminate any potential profit from the meal deal.