McDonald’s is expected to see a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%. This translates to earnings of about $0.05 to $0.25 for each meal sold, as noted by restaurant analyst Mark Kalinowski.
Kalinowski explained that the promotion is part of McDonald’s strategy to attract inflation-burdened consumers back to their locations, with the hope that customers will make additional purchases beyond the $5 meal.
However, the ability to turn a profit hinges on various factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, emphasized that the $5 deal is “more promotional than profitable.”
While the offer may draw customers to McDonald’s, it does not guarantee that franchise owners will benefit from it. Approximately 95% of McDonald’s restaurants are operated by franchisees, who set their own prices and bear additional costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchise owners often implement promotions like the $5 meal deal to help offset overhead costs. Nevertheless, Spiegel characterized the bundle as a “loss leader” aimed at attracting and retaining customers.
When considering added expenses such as labor, packaging, condiments, delivery charges, and marketing, Spiegel pointed out that franchise owners may find themselves eliminating any potential profit from the meal deal.