McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% to 5%. This translates to approximately $0.05 to $0.25 profit for each meal sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this meal deal is part of McDonald’s strategy to attract consumers who are feeling the pinch from inflation. The goal is to entice customers back into the restaurant, encouraging them to purchase additional items beyond the $5 deal.
However, profitability will hinge on various factors, including the prices of ingredients, labor costs, and other overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
While the deal may bring diners to the restaurant, it does not guarantee that franchise owners will reap the benefits. Approximately 95% of McDonald’s locations are franchised, meaning that individual owners must manage their own pricing and handle overhead costs like rent, insurance, permits, and taxes.
In a statement made by Joe Erlinger, the president of McDonald’s U.S., he mentioned that franchisees utilize promotional offers like the $5 meal deal to alleviate some of their overhead costs. Despite this, Spiegel argues that the deal is essentially a “loss leader” aimed at attracting customers. When accounting for the additional expenses related to labor, packaging, condiments, delivery fees, and marketing, many franchise owners could end up with little to no profit from the bundled items.