McDonald’s is set to introduce a $5 meal deal that may yield a modest profit margin, estimated to be between 1% and 5%, translating to roughly $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski.
This promotion aims to attract customers facing inflationary pressures and encourages them to spend more than the $5 deal once inside the restaurant. However, the actual profitability of the deal will depend on various factors, including the cost of ingredients, labor, and overhead expenses.
Consulting firm president Arlene Spiegel noted that the $5 meal deal is more of a promotional strategy rather than a profitable venture. She emphasized that while the deal might bring customers back, it may not guarantee significant profits for franchisees, who own about 95% of McDonald’s locations. These franchise owners set their own prices and are responsible for managing additional costs such as rent, insurance, permits, and taxes.
In a previous statement, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often implement promotional offers like the $5 meal deal to help offset their overhead costs. Nevertheless, Spiegel pointed out that the bundle acts primarily as a “loss leader,” aimed at attracting and retaining customers. Once you consider the added expenses of labor, packaging, condiments, delivery fees, and marketing, she noted that franchise owners effectively eliminate any potential profit from the items included in the deal.