McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%. This translates to approximately $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski. The fast-food chain aims to attract price-sensitive consumers who have been impacted by inflation, hoping that once they come in for the deal, they will purchase additional items.
However, the profitability of this offer will be influenced by various factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, remarked that the $5 meal deal is “more promotional than profitable.”
Furthermore, while the promotion may entice customers to dine in, franchise owners may not directly benefit from these profits. With around 95% of McDonald’s locations being franchise-owned, individual owners set their pricing and incur their own expenses, such as rent and insurance.
In a statement made by Joe Erlinger, president of McDonald’s U.S., he noted that franchisees often implement promotional deals like the $5 meal to reduce their overhead costs. However, Spiegel emphasized that even with promotions, the costs related to labor, packaging, condiments, delivery charges, and marketing could significantly erode or eliminate any potential profits from the deal.