McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to around $0.05 to $0.25 per sale, according to restaurant analyst Mark Kalinowski.
Kalinowski highlighted that this deal is a strategy to attract inflation-weary consumers back to the restaurant, with the hope that customers will purchase additional items beyond the $5 offer.
However, overall profitability will rely on several variables, including ingredient costs, labor expenses, and overhead costs. Arlene Spiegel, president of Arlene Spiegel & Associates, described the meal deal as “more promotional than profitable.”
Despite potentially increasing foot traffic, franchise owners may not benefit significantly from these sales, as approximately 95% of McDonald’s restaurants operate as franchises. Franchisees set their own prices and must manage various expenses, including rent, insurance, permits, and taxes.
In a statement earlier this year, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often implement promotional offers like the $5 meal deal to help offset their overhead costs. Nonetheless, Spiegel noted that the deal acts more as a “loss leader” aimed at attracting customers rather than a reliable source of profit. Once additional costs such as labor, packaging, condiments, and marketing are considered, franchise owners could see little to no profit from each item included in the promotion.