McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated to range from 1% to 5%. This translates to earnings of approximately $0.05 to $0.25 for each meal bundle sold, as noted by restaurant analyst Mark Kalinowski.
Kalinowski indicated that the deal aims to attract inflation-weary consumers back to the restaurant, with the hope that once inside, they will purchase additional items beyond the $5 offering.
However, profitability will rely on several factors, including ingredient costs, labor, and operating expenses. Arlene Spiegel, president of consultancy firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
She pointed out that even if the meal deal succeeds in bringing diners back, it may not significantly benefit franchisees, who own approximately 95% of McDonald’s locations. Franchise owners establish their own pricing and must manage various expenses such as rent, insurance, permits, and taxes.
In May, the U.S. president of McDonald’s, Joe Erlinger, mentioned that franchisees attempt to offset these costs through promotional offers like the $5 meal deal. Nonetheless, Spiegel referred to the bundle as a “loss leader” intended to attract and retain customers.
When considering additional expenses such as labor, packaging, condiments, delivery charges, and marketing, Spiegel concluded that franchise owners often find their profits wiped out across the items included in the deal.