McDonald’s may see a modest profit from its $5 meal deal, according to restaurant analyst Mark Kalinowski, who estimates a profit margin between 1% and 5%. This translates to approximately $0.05 to $0.25 for each meal bundle sold.
Kalinowski suggests that the deal is a strategy to attract consumers who are feeling the pinch of inflation, with the goal of encouraging them to purchase more than just the $5 offering once they enter the restaurant.
However, profitability is contingent on various factors including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, pointed out that the $5 deal is “more promotional than profitable.”
Moreover, the profitability for franchise owners may not be straightforward. About 95% of McDonald’s locations are franchisee-operated, meaning owners have the authority to set their own prices and must manage additional expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., noted that franchisees often use promotional deals like the $5 meal to help manage their overhead costs. Nevertheless, Spiegel emphasized that the bundle serves primarily as a “loss leader” aimed at attracting and retaining customers. With the added costs of labor, packaging, condiments, delivery fees, and marketing, franchise owners may find that these expenses effectively eliminate any potential profit from the deal.