McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold, according to restaurant industry analyst Mark Kalinowski.
This initiative aims to attract inflation-weary customers back to its locations, with hopes that once they are in the restaurant, they will purchase additional items beyond the $5 offer. However, actual profitability hinges on various factors, including ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.” She explained that while the deal could help increase foot traffic, franchise owners may not see a significant profit due to their control over pricing and the need to cover extra expenses, such as rent, insurance, and taxes.
Approximately 95% of McDonald’s outlets are franchise-owned, which means each owner has to manage their own costs. In a statement earlier this year, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often use promotional offers, like the $5 meal deal, to offset overhead expenses. Nonetheless, Spiegel emphasized that the meal bundle serves mainly as a “loss leader” to attract customers, pointing out that once labor, packaging, condiments, delivery, and marketing costs are accounted for, franchise owners may end up erasing any potential profit from the deal.