McDonald’s is expected to achieve only a modest profit from its $5 meal deal, with estimated profit margins ranging between 1% and 5%. This translates to earnings of approximately $0.05 to $0.25 for each meal bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this initiative aims to attract inflation-weary customers back to the restaurant, with hopes that they will make additional purchases beyond the $5 meal.
However, profitability will hinge on various factors, including ingredient costs, labor, and other overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Even if the meal deal successfully draws customers in, it may not guarantee profits for franchise owners. With approximately 95% of McDonald’s locations being franchise-run, individual owners determine their own pricing and are responsible for covering expenses like rent, insurance, permits, and taxes.
In May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often mitigate overhead costs by offering promotions like the $5 meal. Nevertheless, Spiegel remarked that the deal primarily serves as a “loss leader” intended to attract and retain customers.
Once factors such as labor, packaging, condiments, delivery costs, and marketing are considered, franchise owners may find that they “basically wipe out any profit” from the items included in the offer.