McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%. This translates to approximately $0.05 to $0.25 for each meal bundle sold, according to restaurant analyst Mark Kalinowski.
The deal is part of McDonald’s strategy to attract budget-conscious consumers dealing with inflation, encouraging them to purchase more than just the $5 meal. However, profitability will rely on various factors, including ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She pointed out that while the deal might draw customers back, franchisees may not benefit from the expected profits, as around 95% of McDonald’s locations are franchise-owned. Franchise owners set their own prices and bear costs such as rent, insurance, permits, and taxes.
In a statement made in May, McDonald’s U.S. president Joe Erlinger noted that franchisees often implement promotional offers like the $5 meal to manage overhead expenses. However, Spiegel emphasized that this offering acts more as a “loss leader” aimed at attracting and retaining customers.
After accounting for additional costs such as labor, packaging, condiments, delivery fees, and marketing, the profit margins for franchise owners are significantly diminished, potentially erasing any financial gain from the meal deal altogether.