McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins ranging from 1% to 5%, translating to approximately $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
This promotional deal aims to attract consumers who are feeling the pinch of inflation, and McDonald’s hopes that once customers enter the restaurant, they will be inclined to purchase additional items beyond the $5 meal.
However, profitability will hinge on various factors including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Though the deal may draw customers back to the restaurants, it’s not guaranteed that franchise owners will see increased profits. About 95% of McDonald’s locations are franchise-owned, meaning that individual owners set their prices while also managing expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., noted that franchisees often attempt to offset overhead costs by introducing promotional offers like the $5 meal deal. Despite this strategy, Spiegel indicated that the bundle primarily serves as a “loss leader” to attract and retain customers.
After considering the expenses tied to labor, packaging, condiments, delivery, and marketing, Spiegel claimed that franchise owners may effectively eliminate any profit margin on the items included in the deal.