McDonald’s is expected to earn a modest profit from its $5 meal deal, predicted to range between 1% and 5%, translating to approximately $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski. The fast-food giant aims to attract price-sensitive consumers during inflationary times, hoping that once customers are inside, they will make additional purchases beyond the $5 offering.
However, profitability hinges on various factors, including the price of ingredients, labor costs, and overall overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, emphasized that the $5 meal deal is “more promotional than profitable.”
The operational structure complicates profit distribution, as around 95% of McDonald’s outlets are franchise-owned. Franchisees have the freedom to set their own prices but are also responsible for overhead costs such as rent, insurance, permits, and taxes. In May, Joe Erlinger, the U.S. president of McDonald’s, mentioned that franchisees aim to offset these costs by implementing promotional deals like the $5 meal.
Despite the push to attract diners with the meal bundle, Spiegel pointed out that it functions primarily as a “loss leader” designed to draw and retain customers. After incorporating the costs associated with labor, packaging, condiments, delivery, and marketing, franchise owners often find that these expenses negate any potential profits from the deal.