McDonald’s is poised to earn a modest profit from its $5 meal deal, with margins expected to be between 1% and 5%, translating to approximately $0.05 to $0.25 per meal sold, according to restaurant analyst Mark Kalinowski.
The initiative is intended to attract inflation-weary customers back to the restaurant, with hopes that they will choose additional menu items beyond the $5 deal. However, profitability will be influenced by various factors including the costs of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, remarked that the $5 meal deal is “more promotional than profitable.” She noted that while getting customers through the door is beneficial, franchise owners, who operate around 95% of McDonald’s locations, determine their own pricing and face their own financial burdens such as rent, insurance, and taxes.
In a statement from May, McDonald’s U.S. president Joe Erlinger discussed how franchisees often use promotional offers like the $5 meal deal to alleviate overhead costs. Nonetheless, Spiegel indicated that these deals are primarily “loss leaders” aimed at attracting and retaining customers. Once additional expenses related to labor, packaging, condiments, delivery, and marketing are considered, franchise owners may find that their profits are negligible or completely eliminated.