McDonald’s may see modest profits from its $5 meal deal, with estimated margins ranging from 1% to 5%, translating to approximately $0.05 to $0.25 per meal sold, according to restaurant analyst Mark Kalinowski.
This initiative is part of McDonald’s strategy to attract consumers who are feeling the effects of inflation. The chain aims to encourage customers to enter the restaurant with the expectation that they will purchase additional items beyond the $5 deal.
However, actual profitability will hinge on several factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
She noted that even if the deal drives foot traffic, franchise owners may not see proportional profits. With around 95% of McDonald’s outlets being franchise-owned, each owner sets their own prices and must manage expenses like rent, insurance, permits, and taxes.
In May, Joe Erlinger, the president of McDonald’s U.S. operations, explained that franchisees often use promotions like the $5 meal to offset overhead costs. Nevertheless, Spiegel emphasized that the meal deal primarily serves as a “loss leader aimed at capturing and recapturing diners,” suggesting that when all related costs are taken into consideration, franchise owners might eliminate any potential profits from the deal.