McDonald’s may see a modest profit from its new $5 meal deal, with profit margins estimated between 1% and 5%, translating to roughly $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
The fast-food chain is introducing this offering as a strategy to attract consumers fatigued by inflation, with the hope that once they visit the restaurant, they will also purchase additional items beyond the $5 deal.
However, profitability will largely depend on various factors including ingredient prices, labor costs, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.”
Even if the deal successfully draws customers back to the restaurant, it does not necessarily mean franchise owners will benefit from the profits. Approximately 95% of McDonald’s locations are owned by franchisees, who set their own pricing and are responsible for additional expenses like rent, insurance, permits, and taxes.
In May, Joe Erlinger, the president of McDonald’s U.S., mentioned that franchisees often use promotional offers like the $5 meal deal to help offset their overhead costs. Despite this approach, Spiegel highlights that the deal functions more as a “loss leader to capture and re-capture guests.”
When accounting for the costs of labor, packaging, condiments, delivery, and marketing, she pointed out that franchise owners typically eliminate any profit from the meal deal or its individual components.