McDonald’s is set to generate a modest profit from its new $5 meal deal, with profit margins estimated to range between 1% and 5%, translating to approximately $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski highlighted that this meal deal aims to attract inflation-weary customers back to the restaurant, encouraging them to purchase more items beyond the $5 offering. However, the profits will heavily rely 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.” She noted that even if the deal successfully draws diners back, franchise owners may not benefit from those profits.
Approximately 95% of McDonald’s locations are franchisee-owned, meaning franchisees establish their own prices and deal with expenses like rent, insurance, permits, and taxes. In a May statement, Joe Erlinger, president of McDonald’s U.S., indicated that franchisees attempt to offset these overhead costs using promotional deals like the $5 meal.
However, Spiegel emphasized that the deal primarily serves as a “loss leader” designed to draw in and retain customers. After accounting for additional expenses such as labor, packaging, condiments, delivery fees, and marketing, franchise owners may eliminate any potential profit from the items included in the deal.