McDonald’s is expected to gain only a modest profit from its $5 meal deal, with profit margins projected to be between 1% and 5%, equating to roughly $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
The fast-food giant is aiming to attract inflation-weary consumers with this deal, which is designed to bring customers back through the doors, encouraging them to make additional purchases beyond the $5 meal. However, profitability may be influenced by various factors such as ingredient costs, labor expenses, and other overheads.
Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is more of a promotional strategy than a means of generating significant profit. Even if the deal does increase foot traffic, it may not result in noticeable profits for franchise owners, as approximately 95% of McDonald’s locations are franchised. The franchisees set their own prices and bear the burden of various expenses, including rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, stated that franchisees often utilize promotional offers like the $5 meal deal to offset overhead costs. Nevertheless, Spiegel pointed out that the bundle is seen as a “loss leader” aimed at attracting and retaining customers. When accounting for additional costs such as labor, packaging, condiments, delivery fees, and marketing, franchise owners may find that any potential profit is essentially negated by these expenses.