McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%, translating to approximately $0.05 to $0.25 per meal sold, according to restaurant analyst Mark Kalinowski.
This promotional pricing is part of McDonald’s strategy to attract consumers who are feeling the effects of inflation. The goal is not just to entice customers with the $5 meal but to encourage them to buy additional items once they are in the restaurant.
However, profitability hinges on various factors, including the cost of ingredients, labor, and overall overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, noted that this deal is “more promotional than profitable.”
Although the meal deal may draw customers back to the restaurants, it doesn’t guarantee that franchise owners will benefit from these profits. Approximately 95% of McDonald’s locations are franchisee-owned, meaning individual owners set their prices and must manage costs like rent, insurance, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., stated that franchisees often implement promotional offers like the $5 meal to offset these overhead costs. Nevertheless, Spiegel emphasized that the bundle acts more as a “loss leader,” aimed at attracting and retaining customers. Once additional expenses related to labor, packaging, condiments, delivery, and marketing are considered, many franchise owners may find that they eliminate any profits from the offerings.