McDonald’s is set to potentially earn 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, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the promotion aims to attract consumers who are feeling the effects of inflation, encouraging them to make additional purchases beyond the $5 offer. However, the overall profitability of the deal will be influenced by factors such as the costs of ingredients, labor, and other overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.” She emphasized that while the deal may draw customers back to the restaurant, it does not guarantee that franchisees will see profits from it. Approximately 95% of McDonald’s locations are franchise-owned, and these owners set their own prices while taking on additional costs including rent, insurance, permits, and taxes.
In a statement made in May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees utilize promotional offers like the $5 meal deal to manage their overhead expenses. Nonetheless, Spiegel described the bundle as primarily a “loss leader” aimed at attracting customers. She pointed out that once costs related to labor, packaging, condiments, delivery, and marketing are considered, franchise owners may eliminate any potential profit from the deal.