McDonald’s is likely to see only a modest profit margin from its $5 meal deal, with estimates suggesting a profit of between 1% and 5%, translating to approximately $0.05 to $0.25 per meal, according to restaurant analyst Mark Kalinowski.
This meal deal is part of McDonald’s strategy to attract consumers who are feeling the pinch of inflation and encourage them to spend more than just the initial $5. However, the potential for profits is influenced by various factors, including ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, noted that this pricing strategy makes the $5 deal “more promotional than profitable.” She emphasized that even if the meal deal successfully draws customers into the restaurant, it doesn’t guarantee franchise owners will see profits.
Approximately 95% of McDonald’s locations are franchise-operated, meaning that franchisees control their pricing and must manage additional costs such as rent, insurance, permits, and taxes. In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often use promotional offers, like the $5 meal deal, to reduce those overhead costs.
Nonetheless, Spiegel pointed out that this bundle serves more as a “loss leader” aimed at attracting customers rather than generating significant profit. When considering the added costs of labor, packaging, condiments, delivery charges, and marketing, she concluded that franchisees often end up eliminating nearly all profit from the items included in the deal.