We make no health claims for the new $5 deal at McDonald’s: A McDouble cheeseburger or a McChicken sandwich, four chicken nuggets, french fries and a small soda. We’d say that if you are having a cheeseburger and fries, the addition of fried McNuggets are, well, a tad extra , as the kids say. Which is not to say we have not partaken of the opportunity. We certainly have, nuggets and all.
But we will say this: It is a very good deal for cash-strapped families in a world where fast-food prices have shot up over the last couple of years, not just because the cost of ingredients and labor were rising precipitously, but because restaurants and other businesses could do so as prices for other goods were going up and they felt like they had cover. Families found themselves shelling out well upwards of $50 to feed four at fast-food joints that used to be cheap.
But, hosanna, the market reasserted itself without any government mandates or interventions. Customers stopped buying expensive menu items, and McDonald’s reacted. They’re not the only chains to do so. There are comparable deals at competing restaurant chains like Taco Bell, Burger King and even Starbucks, which now is offering a tall iced or hot coffee paired with a fair-to-middling butter croissant for that same 5 greenbacks. Enough to pay, we’d argue, but Starbucks customers have been paying a whole lot more of late for their caffeine and pastries.
One of the peculiarities of today’s wild, income-discriminating pricing mechanisms is that shopping around doesn’t so much mean going across the street as picking a different section of the same drive-through menu: rich folks this side, please, where there is lots of profit, and the shamelessly cost-conscious please look over here without the pretty pictures. There to the side, perhaps a little less of pretty much the same food comes at a far, far better price.
Morningstar mused recently that the profit margin for most McDonald’s franchisees on that $5 deal probably was only about a quarter, although if you sell enough of them, a 5% margin is not nothing. And it shows you how much money is being made on those combos that reach $15 or even more: Sandwiches have high food costs, but fries and drinks don’t cost but a tiny fraction of the purchase price.
We already knew where to look on the menu: McDonald’s already had a buy one, get one for $1 deal going in Chicagoland. But the new $5 deal, which is spreading all over the land of freeway exits and state route whatevers, is yet better.
It’s a really nice break for families: occasionally .
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