McDonald’s is set to potentially generate a profit from its $5 meal deal, but the profit margin will be quite modest. According to restaurant analyst Mark Kalinowski, the fast-food chain could expect a profit margin between 1% and 5%, translating to roughly $0.05 to $0.25 earned for each meal sold.
This meal deal is part of McDonald’s strategy to attract inflation-weary consumers back to their restaurants, encouraging them to purchase additional items beyond just the $5 offering. However, the profitability of this deal hinges on various factors, including costs associated with ingredients, labor, and overhead.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as more promotional than profitable. She pointed out that while the deal may draw customers in, it does not guarantee profits for franchise owners, as about 95% of McDonald’s locations are franchise-owned. These franchisees determine their own pricing and must manage additional expenses such as rent, insurance, permits, and taxes.
In a statement from May, McDonald’s U.S. president Joe Erlinger noted that franchisees often utilize promotional offerings like the $5 meal deal to offset their overhead costs. Nonetheless, Spiegel emphasized that the deal functions primarily as a “loss leader” aimed at bringing in customers, and when considering all additional expenses—labor, packaging, condiments, delivery charges, and marketing—franchise owners may find that profits from the deal are largely diminished.