McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%. This translates to roughly $0.05 to $0.25 for every meal package sold, according to restaurant analyst Mark Kalinowski. The fast-food chain aims to attract inflation-weary consumers back into its locations, hoping that once they enter, they will purchase more items beyond the $5 deal.
However, achieving a profit will hinge on several factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, noted that the $5 meal deal is more about promotions than profitability.
Even if the campaign draws customers back, it may not translate into profits for franchisees. Approximately 95% of McDonald’s locations are franchisee-operated, meaning owners set their own prices while dealing with additional costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., stated that franchisees often implement promotional deals like the $5 meal to help offset these overhead costs. Nevertheless, Spiegel characterized the deal as a “loss leader” aimed at attracting customers. She pointed out that once the expenses related to labor, packaging, condiments, delivery, and marketing are accounted for, franchise owners could effectively eliminate any potential profit from the items involved in the deal.