McDonald’s is set to introduce a $5 meal deal that is expected to yield only a modest profit, estimated to be between 1% and 5%. This profit translates to approximately $0.05 to $0.25 for each meal bundle sold, according to restaurant analyst Mark Kalinowski.
The fast-food giant aims to attract budget-conscious consumers who are feeling the effects of inflation with this deal, hoping that once customers are inside the restaurant, they will purchase additional items beyond the $5 offering.
However, the potential for profitability hinges on several factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, explained that the $5 meal deal is “more promotional than profitable.”
She noted that while the deal might help draw customers back into restaurants, it doesn’t guarantee profitable outcomes for franchise owners. Approximately 95% of McDonald’s restaurants are franchisee-owned, meaning individual owners dictate prices and manage their expenses, which include rent, insurance, permits, and taxes.
In a statement from May, Joe Erlinger, McDonald’s U.S. president, indicated that franchisees utilize promotional offers like the $5 meal deal to help offset their overhead costs. Nevertheless, Spiegel described the bundle as primarily a “loss leader,” intended to attract and retain customers. When taking into account additional costs such as labor, packaging, condiments, delivery fees, and marketing, she stated that franchise owners often eliminate any potential profits associated with the deal.