McDonald’s is expected to gain some profit from its $5 meal deal, although the margin is likely to be modest. According to restaurant analyst Mark Kalinowski, the fast-food chain may see profit margins ranging from 1% to 5%, which translates to earnings of approximately $0.05 to $0.25 for each meal bundle sold.
Kalinowski notes that this deal aims to attract consumers who are struggling with inflation, encouraging them to return to the restaurant and possibly purchase additional items beyond the $5 offer.
However, the profitability of the meal deal is contingent on various factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, describes the meal deal as “more promotional than profitable.”
While the promotion may lure diners back to the restaurant, it doesn’t guarantee profits for franchisees. Approximately 95% of McDonald’s locations are franchise-owned, meaning that individual owners set their prices and deal with expenses like rent, insurance, permits, and taxes.
In a previous statement, U.S. president of McDonald’s Joe Erlinger mentioned that franchise owners often run promotional offers to manage these overhead costs. Spiegel further explained that the meal deal functions as a “loss leader” to attract and retain customers. After also accounting for expenses related to labor, packaging, condiments, delivery, and marketing, franchise owners may find that any potential profit from the deal is effectively eliminated.