McDonald’s is expected to see only a modest profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%, translating to approximately $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski. This initiative aims to attract consumers who are feeling the pinch of inflation, encouraging them to enter the restaurant and potentially make additional purchases beyond the $5 offer.
However, profitability is subject to various factors, including ingredient costs, labor expenses, and overhead costs. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.” She emphasized that even if the combo succeeds in drawing customers back, it does not guarantee that franchise owners will benefit financially.
With about 95% of McDonald’s locations being franchise-owned, individual owners have the responsibility of setting their own prices and managing other expenses like rent, insurance, permits, and taxes. Joe Erlinger, McDonald’s U.S. president, mentioned in May that franchisees often utilize promotional offers like the $5 meal deal to help manage their overhead costs.
Spiegel pointed out that the bundle primarily serves as a “loss leader” to attract and retain customers. When accounting for the additional costs associated with labor, packaging, condiments, delivery, and marketing, she asserted that franchise owners may ultimately eliminate any potential profit from the items included in the deal.