McDonald’s is expected to see a modest profit margin from its $5 meal deal, with estimates ranging from 1% to 5%, translating to earnings of approximately $0.05 to $0.25 for each meal sold. According to restaurant analyst Mark Kalinowski, this promotion is part of McDonald’s strategy to attract budget-conscious consumers, with the hopes that customers will make additional purchases once they visit the restaurant.
However, the actual profitability of the $5 meal deal will hinge on several factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that while this deal may increase foot traffic, it may not guarantee profits for franchise owners, who number about 95% of McDonald’s locations. Franchisees set their own prices and bear the burden of various costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, highlighted that franchisees often use promotions, like the $5 meal deal, to offset their overhead costs. Despite this, Spiegel described the deal more as a “loss leader” aimed at attracting and retaining customers. Once additional expenses for labor, packaging, condiments, delivery, and marketing are taken into account, she indicated that franchise owners could find their profit margins significantly diminished or eliminated altogether.