McDonald’s may earn a small profit from its $5 meal deal, with estimates suggesting a profit margin between 1% and 5%, equating to approximately $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
This promotional strategy is aimed at attracting consumers who are feeling the effects of inflation, with the hope that once they enter the restaurant, they will purchase additional items beyond the $5 offer.
However, the ability to turn a profit hinges on various factors, including ingredient costs, labor expenses, and other overheads. Arlene Spiegel, president of Arlene Spiegel & Associates, emphasized that the $5 meal deal is more about attracting customers than generating significant profits.
Furthermore, since around 95% of McDonald’s locations are franchise-owned, individual franchisees set their own prices and manage additional costs such as rent, insurance, permits, and taxes. In a statement from May, McDonald’s U.S. president Joe Erlinger noted that franchisees often attempt to lessen these overheads by providing promotional deals like the $5 meal.
Despite this, Spiegel remarked that the meal bundle functions primarily as a “loss leader” designed to draw in customers. Once expenses for labor, packaging, condiments, delivery, and marketing are accounted for, franchise owners often find that profits from the deal are largely diminished or completely erased.