McDonald’s is poised to earn a modest profit from its $5 meal deal, with profit margins anticipated to range between 1% and 5%, equating to around $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski. This initiative aims to attract budget-conscious consumers feeling the pinch of inflation and encourages them to purchase additional items once they are in-store.
However, actual profitability will be influenced by various factors including ingredient costs, labor, and other operating expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Although the promotion might draw customers back, it does not guarantee that franchise owners will see an increase in profits. Approximately 95% of McDonald’s locations are franchise-operated, which means individual owners determine their pricing and absorb extra costs associated with rent, insurance, permits, and taxes.
In a statement made in May, McDonald’s U.S. president Joe Erlinger noted that franchisees often implement promotional pricing, such as the $5 meal deal, to help alleviate these overhead costs. Despite the strategy, Spiegel referred to the deal as a “loss leader” aimed at attracting patrons. After considering labor, packaging, condiments, delivery fees, and marketing expenses, she suggested that franchise owners might effectively eliminate any potential profit from the items included in the promotion.