McDonald’s is expected to see a modest profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%, translating to approximately $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
The fast-food giant aims to attract inflation-weary consumers back into its restaurants, hoping that while patrons come in for the affordable meal, they will also make additional purchases. However, the overall profitability of the meal deal will be influenced by various factors, including ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, indicated that the $5 deal is more promotional than profitable. Although this strategy may drive diners back to the restaurant, it does not guarantee profits for franchise owners, who operate about 95% of McDonald’s locations and set their own prices while managing added expenses like rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often implement promotional offers such as the $5 meal deal to help mitigate those costs. However, Spiegel noted that promotional bundles often serve as “loss leaders” designed to attract and retain customers. Once the additional expenses related to labor, packaging, condiments, delivery, and marketing are taken into account, franchise owners may end up eliminating any potential profits from the meal deal.