McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins predicted to range between 1% and 5%, translating to approximately $0.05 to $0.25 for each meal sold, as noted by restaurant analyst Mark Kalinowski.
This strategy is part of McDonald’s effort to attract consumers affected by inflation, encouraging them to purchase more than just the low-cost meal. However, the profitability of this deal hinges on various factors including ingredient prices, labor costs, and overhead expenses.
Consultant Arlene Spiegel highlighted that the meal deal is primarily promotional rather than a lucrative venture. She stated that even though the offer may draw customers into the restaurant, franchise owners may not benefit financially from it.
With about 95% of McDonald’s locations being franchise-operated, individual owners determine their pricing while dealing with extra costs like rent, insurance, permits, and taxes. In May, Joe Erlinger, the U.S. president of McDonald’s, mentioned that franchisees attempt to alleviate overhead through promotions such as this meal deal.
Nevertheless, Spiegel referred to the bundle as more of a “loss leader” aimed at attracting and retaining customers. Once all additional expenses, which include labor, packaging, condiments, delivery, and marketing, are taken into account, she indicated that franchise owners often find themselves with little to no profit from the meal deal.