McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to approximately $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski. The fast-food giant sees this deal as a strategy to attract inflation-weary consumers back into their restaurants and encourage them to purchase additional items beyond the meal deal.
However, the profitability of the $5 meal deal hinges on various factors, including the cost of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the deal is more about promotion than profit. Even if the deal successfully draws in diners, franchise owners may not benefit significantly due to the various costs they incur, including rent, insurance, permits, and taxes.
With about 95% of McDonald’s locations being franchise-owned, these owners establish their own pricing structures and face numerous operational costs. Joe Erlinger, the U.S. president of McDonald’s, mentioned in May that franchisees often utilize promotional offers, such as the $5 meal deal, to mitigate those overhead costs. Nonetheless, Spiegel referred to the deal as a “loss leader” aimed at attracting and retaining customers. She emphasized that once additional expenses for labor, packaging, condiments, delivery, and marketing are accounted for, the profits from the meal deal are virtually non-existent for owners.