McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to about $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
This meal deal is part of McDonald’s strategy to attract consumers feeling the pinch of inflation, enticing them to come in for the offer and potentially purchase additional items.
However, the actual profitability of this deal hinges on several factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that this deal is more about promotion than generating profit.
Although the $5 meal deal can bring customers back to the restaurant, it might not necessarily lead to increased profits for franchise owners. Approximately 95% of McDonald’s locations are franchised, meaning franchisees determine their own pricing and manage additional expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, the president of McDonald’s USA, stated that franchisees often mitigate these overhead costs by offering promotions like the $5 meal deal. Nonetheless, Spiegel emphasized that this bundle functions primarily as a “loss leader” designed to attract and retain customers. Once costs related to labor, packaging, condiments, delivery, and marketing are considered, she warned that franchise owners could effectively eliminate any potential profits from the deal.