McDonald’s may see a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to approximately $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski.
This meal deal is part of McDonald’s strategy to attract cost-conscious customers back to its restaurants. The intention is to encourage these diners to purchase additional items once inside. However, the actual profitability of the deal depends on various factors, including ingredient prices, labor costs, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” Although it may facilitate customer return, the benefits might not directly translate into profits for franchisees, who own about 95% of McDonald’s locations and must independently manage costs related to rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, acknowledged that franchisees often use promotional deals, like the $5 meal, to help cover their overhead. Nevertheless, Spiegel indicated that the bundle acts more as a “loss leader” aimed at attracting and retaining customers. After accounting for additional expenses, including labor, packaging, condiments, and marketing, franchise owners may find that any profit from the sale of these meal deals is virtually eliminated.