McDonald’s is expected to earn a modest profit from its new $5 meal deal, with profit margins estimated to be between 1% and 5%, translating to earnings of approximately $0.05 to $0.25 for each meal sold. Restaurant analyst Mark Kalinowski notes that this offering is designed to attract inflation-weary consumers back to the restaurant, encouraging them to make additional purchases beyond the deal.
However, the profitability of the $5 meal deal hinges on various factors, including the rising costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the deal as “more promotional than profitable.” While it may help draw customers into McDonald’s, franchise owners might not see a significant increase in profits.
Approximately 95% of McDonald’s locations are franchised, meaning individual owners are responsible for setting prices and managing additional expenses such as rent, insurance, permits, and taxes. Joe Erlinger, president of McDonald’s U.S. operations, stated in May that franchisees often introduce promotional offers like the $5 meal to help manage these overhead costs.
Spiegel emphasized that the package serves primarily as a “loss leader” to attract and retain customers. She warned that when accounting for expenses related to labor, packaging, condiments, delivery, and marketing, franchise owners could effectively eliminate their profit margins on the items included in the deal.