McDonald’s is anticipated to achieve only a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to earnings of about $0.05 to $0.25 per meal, according to restaurant analyst Mark Kalinowski.
This promotional offering aims to attract price-sensitive consumers who may be feeling the effects of inflation. However, it is expected that once customers are drawn in by the meal deal, they may be encouraged to purchase additional items.
The profit potential is contingent on various factors such as rising costs of ingredients, labor, and overall operating expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the meal deal as “more promotional than profitable.”
Moreover, the financial benefits may not directly reach franchise owners. Approximately 95% of McDonald’s locations are franchise-operated, meaning these independent owners set their own prices and are responsible for extra expenses including rent, insurance, permits, and taxes.
In a memo from May, Joe Erlinger, the president of McDonald’s U.S., noted that franchisees often employ promotional offers, such as the $5 deal, to counterbalance their overhead costs. However, Spiegel warned that once expenses such as labor, packaging, condiments, delivery fees, and marketing are accounted for, franchise owners effectively eliminate any profit across the items included in the deal.