McDonald’s is expected to achieve only a modest profit from its $5 meal deal, with profit margins anticipated to range between 1% and 5%, translating to roughly $0.05 to $0.25 for each meal sold. Restaurant analyst Mark Kalinowski highlighted that the promotion aims to attract budget-conscious consumers, encouraging them to purchase additional items once inside the restaurant.
However, the profitability of this offer is contingent on several factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the meal deal as “more promotional than profitable.” She pointed out that while the deal may draw customers in, it does not guarantee profits for franchisees.
Approximately 95% of McDonald’s locations are franchisee-owned, which means individual owners determine their prices and face various additional expenses such as rent and taxes. Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often implement promotional strategies like the $5 meal deal to offset these costs.
Despite its intent to drive in customers, Spiegel referred to the deal as a “loss leader,” aiming to attract and retain patrons. She noted that when considering all associated costs, including labor, packaging, and marketing, franchise owners could end up eliminating any potential profit from the promotion.