McDonald’s is anticipated to generate a slim profit from its new $5 meal deal, with profit margins estimated between 1% and 5%, translating to earnings of approximately $0.05 to $0.25 per meal combo sold. According to restaurant analyst Mark Kalinowski, this initiative is aimed at enticing inflation-weary customers back into their restaurants, with the hope that once inside, they will make additional purchases beyond the promotional offering.
However, the actual profitability of the meal deal hinges on various factors, including the costs associated with ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.”
Even if the deal successfully attracts diners, franchise owners may not necessarily benefit. With around 95% of McDonald’s locations being franchise-owned, these owners are responsible for setting their own prices and managing operating costs, which include rent, insurance, permits, and taxes.
In a recent statement, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often utilize promotional offers like the $5 meal deal to help manage overhead costs. Nevertheless, Spiegel pointed out that this bundle often acts as a “loss leader” to bring customers through the door. After accounting for additional costs such as labor, packaging, condiments, delivery, and marketing, she indicated that many franchise owners effectively eliminate any potential profit from the items included in the deal.