McDonald’s is set to launch a $5 meal deal that could generate a slim profit margin, estimated to be between 1% and 5%, translating to approximately $0.05 to $0.25 per bundle sold. Restaurant analyst Mark Kalinowski notes that this initiative aims to attract inflation-weary consumers back to the fast food chain, encouraging them to purchase more items beyond the meal deal.
However, the profitability of this offer relies on several factors, including rising ingredient prices, labor costs, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, describes the $5 meal as “more promotional than profitable.” She explains that while it may increase foot traffic, franchise owners might not directly benefit from any profits.
With about 95% of McDonald’s locations being franchise-owned, individual owners set their own prices and must manage various expenses such as rent, insurance, and taxes. In May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often use promotions like the $5 meal deal to offset overhead costs.
Spiegel points out that even if the deal successfully attracts customers, the accompanying costs of labor, packaging, condiments, delivery, and marketing could significantly erode profits, effectively leaving franchise owners with little to no financial gain from the promotion.