McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated to range between 1% and 5%, translating to earnings of approximately $0.05 to $0.25 per meal sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the $5 offering aims to attract consumers who are feeling the pinch of inflation and encourages them to purchase more items once they visit the restaurant. However, the profitability of this deal is influenced by various factors, including ingredient costs, labor expenses, and overhead.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, characterized the meal deal as “more promotional than profitable.” She pointed out that, despite the deal’s potential to draw customers back to McDonald’s, franchisees may not see much of a profit due to the significant control they have over pricing and their need to manage expenses like rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often employ promotional strategies like the $5 meal deal to help offset their operating costs. Nonetheless, Spiegel described the package as more of a “loss leader to capture and re-capture guests.” She explained that once owners account for additional expenses including labor, packaging, condiments, delivery, and marketing, it becomes difficult to maintain profitability on any of the items included in the deal.