McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to about $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
This meal promotion is aimed at drawing inflation-weary consumers back to the restaurant, encouraging them to purchase more beyond the $5 deal. However, the profitability of the offer will depend on various factors including ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” Even if it succeeds in attracting diners, franchisees may not experience corresponding profits due to the overhead costs they bear, which include rent, insurance, permits, and taxes.
Approximately 95% of McDonald’s locations are franchise-operated, meaning franchisees can set their own prices and manage costs independently. In May, Joe Erlinger, president of McDonald’s U.S., noted that franchisees look for ways to manage these expenses by offering promotions like the $5 meal deal.
Spiegel further explained that the bundle acts as a “loss leader” designed to bring guests in and retain their loyalty. Once additional costs for labor, packaging, condiments, delivery, and marketing are taken into account, franchise owners often find that any profit from the individual items in the deal is effectively eliminated.