McDonald’s is extending its wildly popular $5 Meal Deal due to overwhelming customer demand. The fast-food giant has seen a significant surge in foot traffic since the deal’s launch, prompting the decision to keep the value menu option around for longer. But just how long will the deal last? Read on to find out the last time you can enjoy this budget-friendly meal.
McDonald’s $5 Meal Deal Extension
Launched on June 25th, McDonald’s $5 Meal Deal — which includes a McDouble or McChicken, a small order of fries, a four-piece order of chicken nuggets, and a small drink — was supposed to run for just four weeks. However, according to a recent memo seen by Bloomberg, 93% of McDonald’s locations have committed to selling the bundle past the initial month-long window. Some restaurants will reportedly offer the deal through August, while others have yet to decide an end date for the promotion.
Bloomberg noted that McDonald’s $5 Meal Deal could be extended even longer as the restaurant chain aims to bolster its “affordability plans through the rest of the year”, especially after it missed quarterly profit estimates for the first time in two years in April as inflation-fatigued consumers became more cautious with their restaurant spending.
The Rise of Fast-Food Meal Deals
Aside from McDonald’s, other fast-food chains have also introduced meal deals of their own to draw back budget-conscious customers to their restaurants. If McDonald’s has the $5 Meal Deal, Burger King has its $5 Your Way Meal; Taco Bell offers its so-called Cravings Value Menu with 10 items under $3, and Wendy’s still sells its $5 Biggie Bag.
Citing data from market research firm Circana, the Wall Street Journal reported that almost 30% of fast food orders had a promotion attached to them in the first three months of 2024. That’s a 3% increase from the same period last year.
However, it remains to be seen whether those meal deals will be enough to draw Americans back to fast-food chains, especially since 78% of them now see fast food as a “luxury,” according to a recent LendingTree survey.
How McDonald’s makes the $5 Meal Deal work
The move to extend McDonald’s $5 Meal Deal is quite surprising, as some of the company’s franchisees expressed their worries that the markdowns brought by the promotion would not yield enough profits to sustain their businesses long-term.
“There simply is not enough profit to discount 30% for this model to be sustainable,” the National Owners Association wrote in a letter when the chain first announced the meal deal in May 2024. “It necessitates a financial contribution by McDonald’s.”
While it’s unclear whether McDonald’s eventually agreed to a financial contribution to help its franchisees run the limited-time $5 Meal Deal promotion, veteran fast-food industry analyst Mark Kalinowski told MarketWatch that there’s a 1% to 5% profit margin on the meal deal, which translates into anywhere from $.05 to $.25 per meal.
Industry experts said bundling food items together makes McDonald’s $5 Meal Deal work.
According to Kalinowski, the profit margin on sandwiches tends to not be so great. For instance, a burger or chicken sandwich might have a food cost of 40%. That means the ingredients in a $5 burger cost the operator $2.
The profit margins, on the other hand, are better on French fries and soft drinks. According to Joey Campanaro, a New York City restaurateur who owns Little Owl, a popular Mediterranean-themed establishment, fries can have a food cost as low as 5%. So, McDonald’s managed to make the $5 Meal Deal work by bundling items with different profit margins together.
While McDonald’s earns profit from the deal, Arlene Spiegel, a New York City hospitality consultant, wanted everyone to know that the promotion isn’t a sales bonanza for franchisees. In addition to the rising cost of ingredients, operators have expenses for labor, rent, insurance, and other things. She even noted that the costs of condiments, napkins, and straws weigh especially heavily when margins are this tight. Because of this, Spiegel said the $5 Meal Deal is “more promotional than profitable.”