McDonald’s Navigates Legal Turbulence While Launching a $5 Meal Deal

McDonald’s is currently facing its first legal action linked to the Quarter Pounder E. coli outbreak while also exploring a new $5 meal deal that may yield a slight profit. According to restaurant analyst Mark Kalinowski, the fast-food chain anticipates a profit margin on this combo ranging from 1% to 5%, translating to earnings of approximately $0.05 to $0.25 for each meal sold.

Kalinowski explained that this meal deal is part of McDonald’s strategy to attract consumers feeling the pinch of inflation, with hopes that once customers are inside, they will purchase additional items beyond the advertised offer. However, the ability to generate profit will hinge on various factors, including ingredient costs, labor expenses, and overhead.

Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, emphasized that the $5 meal deal is “more promotional than profitable.” She pointed out that even if the deal successfully draws customers back into McDonald’s locations, the actual profits may not benefit franchise owners directly. Since about 95% of McDonald’s restaurants are franchise-owned, each owner sets their own prices and must manage various costs associated with running the business, such as rent, insurance, permits, and taxes.

In May, McDonald’s U.S. President Joe Erlinger noted that franchisees often try to offset these overhead costs by introducing promotional offers like the $5 meal deal. Nevertheless, Spiegel indicated that this bundle operates primarily as a “loss leader,” aiming to attract and retain customers. Once the costs for labor, packaging, condiments, delivery, and marketing are accounted for, she stated that franchise owners may eliminate any profit, whether from individual items or from the combination meal itself.

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