McDonald’s is expected to generate a modest profit from its $5 meal deal, with margins estimated between 1% and 5%, translating to roughly $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski. This offering aims to attract price-sensitive consumers back to the restaurant, encouraging them to make additional purchases beyond the deal.
However, the profitability of the meal deal is influenced by various factors, including the costs of ingredients, labor, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, remarked that the $5 meal deal is “more promotional than profitable.”
While the deal could potentially draw diners back in, it’s important to note that franchise owners may not benefit from those profits. Approximately 95% of McDonald’s locations are franchise-operated, meaning that these owners set their own prices and manage additional expenses like rent, insurance, permits, and taxes.
In a statement in May, McDonald’s U.S. president Joe Erlinger indicated that franchisees often implement promotional offers, like the $5 meal deal, to offset overhead costs. Nonetheless, Spiegel emphasized that the bundle functions more as a “loss leader” designed to attract customers. Once accounting for costs associated with labor, packaging, condiments, delivery, and marketing, franchise owners effectively eliminate potential profits on the items included in the deal.