McDonald’s is expected to see a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to about $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
The fast-food chain aims to attract inflation-weary customers with this deal, with the hope that once they enter the restaurant, they will purchase additional items beyond the $5 offer. However, the profitability of this deal depends on various factors, including ingredient costs, labor, and overhead expenses.
Consulting firm president Arlene Spiegel described the $5 meal deal as “more promotional than profitable.” While this initiative may draw diners into the restaurant, it does not guarantee profits for franchisees, who own approximately 95% of McDonald’s locations. These franchise owners set their own prices and must manage expenses like rent, insurance, permits, and taxes.
In May, Joe Erlinger, President of McDonald’s U.S., noted that franchisee owners utilize promotional offers like the $5 meal to help alleviate overhead costs. Nevertheless, Spiegel indicated that the meal is primarily a “loss leader” intended to attract and retain customers. After considering additional expenses such as labor, packaging, condiments, delivery fees, and marketing, Spiegel stated that franchise owners often end up with little to no profit from the items included in the deal.