McDonald’s is expected to make a small profit from its newly introduced $5 meal deal, with profit margins anticipated to range between 1% and 5%. This translates to earnings of approximately $0.05 to $0.25 for every meal bundle sold, as noted by restaurant analyst Mark Kalinowski.
Kalinowski explained that the meal deal serves as a strategy for McDonald’s to attract customers facing inflation and encourages them to purchase additional items once they are inside the restaurant. However, overall profitability will rely on various factors, such as the costs of ingredients, labor, and overhead expenses.
Arlene Spiegel, the president of Arlene Spiegel & Associates, described the $5 meal deal as being “more promotional than profitable.” She highlighted that although the deal could increase foot traffic, it doesn’t guarantee that franchise owners will see those profits. Approximately 95% of McDonald’s locations are franchised, meaning individual owners set their own prices and manage additional expenses like rent, insurance, permits, and taxes.
In a statement from May, Joe Erlinger, the president of McDonald’s in the U.S., mentioned that franchisees often use promotional offers like the $5 meal to help offset overhead costs. Nonetheless, Spiegel pointed out that this deal acts more as a “loss leader” intended to attract and retain customers. When considering the extra expenses involved, such as labor, packaging, condiments, delivery fees, and marketing, she claimed that franchise owners often eliminate any potential profit from the items included in the deal.