McDonald’s is anticipated to generate a modest profit from its new $5 meal deal, which may be between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
This promotional strategy aims to attract consumers dealing with inflation back to its outlets, with the hope that once inside, they will make additional purchases beyond the $5 offer.
However, the actual profit margin is contingent on various factors such as ingredient costs, labor, and other overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Kalinowski noted that while the deal may entice visitors to the restaurant, it might not significantly benefit franchisees financially. Approximately 95% of McDonald’s locations are franchisee-owned, meaning that owners set their own prices and manage various expenses like rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, remarked that franchisees often alleviate overhead costs by launching promotional initiatives like the $5 meal deal. Nevertheless, Spiegel mentioned that the value bundled in the meal acts as a “loss leader” to attract and retain customers. She emphasized that once all costs, including labor, packaging, condiments, delivery fees, and marketing are calculated, owners often find that they eliminate any profit from the offer.