McDonald’s is expected to yield a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to earnings of approximately $0.05 to $0.25 per bundle sold, as noted by restaurant analyst Mark Kalinowski.
According to Kalinowski, this promotional deal is a strategy by McDonald’s to attract customers who are feeling the pinch of inflation, hoping that once inside, they will make additional purchases beyond just the $5 meal.
However, profitability hinges on various factors including the fluctuating costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Despite any increase in customer visits, it does not guarantee that franchise owners will see profits. About 95% of McDonald’s locations are franchise-owned, meaning those owners determine their own prices and bear the burden of additional costs such as rent, insurance, permits, and taxes.
In a statement from May, Joe Erlinger, the president of McDonald’s U.S., revealed that franchisees often initiate promotional offers like the $5 meal deal to combat these overhead costs.
However, Spiegel commented that the bundle serves primarily as a “loss leader to capture and re-capture guests.” When considering the extra expenses related to labor, packaging, condiments, delivery, and marketing, she concluded that franchise owners often end up erasing any potential profit from the items in this meal deal.