McDonald’s is poised to gain a modest profit from its $5 meal deal, with estimated profit margins between 1% and 5%, translating to roughly $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
This promotional strategy aims to attract consumers who are feeling the effects of inflation, with the hope that once they visit the restaurant, they will make additional purchases beyond the $5 offering.
However, profitability will be contingent on various factors, including the costs associated with ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Kalinowski noted that while the offer might incentivize people to return to McDonald’s, it does not guarantee profits for franchise owners. Approximately 95% of McDonald’s locations are franchisee-operated, meaning that these owners set their own pricing and bear the burden of additional expenses like rent, insurance, permits, and taxes.
In a statement made in May, the president of McDonald’s U.S., Joe Erlinger, indicated that franchisees often implement promotional deals like the $5 meal to offset overhead costs. Nonetheless, Spiegel emphasized that the meal deal is primarily a “loss leader” meant to attract customers. Once various costs such as labor, packaging, condiments, delivery, and marketing are accounted for, the potential profits for franchisees could be significantly diminished or eliminated entirely.