McDonald’s is expected to see a modest profit from its $5 meal deal, with projected profit margins ranging from 1% to 5%, amounting to approximately $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski. This deal aims to attract consumers who are feeling the pinch of inflation, with the hope that once they arrive, they might purchase additional items beyond the $5 offer.
However, profitability will depend on various factors such as the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” This strategy may help draw diners back into the restaurants, but it may not necessarily translate to profits for franchisees, who operate approximately 95% of McDonald’s locations. These franchise owners have the flexibility to set their own prices but also bear the burden of added costs like rent, insurance, permits, and taxes.
In a statement made in May, McDonald’s U.S. president Joe Erlinger noted that franchisees often use promotional offers, like the $5 meal deal, to offset overhead expenses. Nevertheless, Spiegel pointed out that the deal might be more about attracting customers than generating profit, as factors such as labor, packaging, condiments, delivery charges, and marketing could significantly diminish any earnings from the meal combination.