McDonald’s is expected to see only a modest profit from its new $5 meal deal, with profit margins projected to be between 1% and 5%, translating to roughly $0.05 to $0.25 per meal sold, according to restaurant analyst Mark Kalinowski. The fast-food giant aims to attract customers who are feeling the pinch of inflation, hoping that once they enter the restaurant, they will purchase additional items beyond the value meal.
However, the profitability of this deal is contingent on various factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.”
She emphasized that even if this promotion brings customers back into the restaurant, the profits may not trickle down to franchisees, as approximately 95% of McDonald’s locations are franchised. Franchise owners set their own prices and face additional costs such as rent, insurance, permits, and taxes.
In a previous statement, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often use promotional offers like the $5 meal deal to counterbalance overhead costs. Nevertheless, Spiegel warned that the bundle serves primarily as a “loss leader” to attract customers. After accounting for expenses such as labor, packaging, condiments, delivery, and marketing, franchise owners may find that they effectively eliminate any profit from these promotional items.