McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%. This translates to approximately $0.05 to $0.25 per meal sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the value meal is a strategy for McDonald’s to attract customers who are feeling the effects of inflation, with the goal of encouraging them to purchase additional items once they are in the restaurant.
However, the potential for profit is influenced by several factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, emphasized that the $5 meal deal is “more promotional than profitable.”
Furthermore, while the meal deal may bring diners back to McDonald’s, it does not necessarily guarantee profits for franchisees. About 95% of McDonald’s locations are franchise-owned, meaning that the owners independently set their prices and bear additional costs like rent, insurance, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often implement promotional prices, such as the $5 meal deal, to manage these overhead costs. However, Spiegel pointed out that this meal bundle serves primarily as a “loss leader” to attract and retain customers. Once owners account for labor, packaging, condiments, delivery charges, and marketing expenses, the result is often a diminishing profit margin on the items included in the deal.