McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%. This translates to earnings of approximately $0.05 to $0.25 for each meal bundle sold, as reported by restaurant analyst Mark Kalinowski.
According to Kalinowski, the meal deal is part of McDonald’s strategy to attract budget-conscious consumers and encourage them to spend more than just the $5 on additional items once they enter the restaurant.
However, the overall profitability of this deal hinges on various factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.”
While the deal may entice diners back to McDonald’s, it does not guarantee profits for franchisees, who own approximately 95% of McDonald’s locations. Franchise owners set their own prices and handle additional expenses such as rent, insurance, permits, and taxes.
Joe Erlinger, president of McDonald’s U.S., highlighted that franchisees often implement promotional offers like the $5 deal to help offset their overhead costs. However, Spiegel described the meal bundle as a “loss leader” aimed at attracting customers, indicating that when factoring in labor, packaging, condiments, delivery charges, and marketing costs, franchise owners may end up eliminating any profit from the deal.