McDonald’s is anticipated to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%. This translates to earnings of approximately $0.05 to $0.25 for each meal sold, as noted by restaurant analyst Mark Kalinowski.
Kalinowski highlighted that this deal is part of McDonald’s strategy to attract budget-conscious consumers affected by inflation, encouraging them to make additional purchases beyond the $5 meal.
However, the success of this initiative hinges on various expenses, including ingredient costs, labor, and overhead, making the $5 meal more of a promotional tactic than a significant profit generator. Arlene Spiegel, president of Arlene Spiegel & Associates, emphasized that franchisees, which operate around 95% of McDonald’s locations, have to manage their own pricing and cover extra costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees often use promotional offers like the $5 meal deal to manage their overheads. Nonetheless, Spiegel remarked that the deal primarily serves as a “loss leader to capture and re-capture guests.” When accounting for the added expenses of labor, packaging, condiments, delivery, and marketing, she indicated that franchise owners might ultimately forgo any profits related to the deal.