McDonald’s is expected to see a modest profit from its recently introduced $5 meal deal, with profit margins estimated to be between 1% and 5%. This translates to earnings of about $0.05 to $0.25 for each meal bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this initiative aims to attract budget-conscious consumers during times of inflation, hoping that once customers are inside the restaurant, they will make additional purchases beyond the $5 meal offer.
However, the profitability of the meal deal will be influenced by several factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 deal as “more promotional than profitable.”
Furthermore, even if the promotion successfully draws in customers, franchise owners may not see significant profits. Approximately 95% of McDonald’s locations are franchise-owned, meaning individual owners set their own prices and bear the burden of additional costs such as rent, insurance, permits, and taxes.
In May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees utilize promotional offers like the $5 meal deal to help manage their overhead expenses. However, Spiegel pointed out that these deals often serve as “loss leaders” meant to attract and retain customers. After accounting for various costs associated with labor, packaging, condiments, delivery, and marketing, franchise owners may find that they effectively eliminate any profit anticipated from the deal.