McDonald’s may generate a modest profit from its $5 meal deal, with expected profit margins ranging from 1% to 5%, equating to approximately $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski. This initiative aims to attract inflation-weary consumers back to the restaurants, with the hope that they will make additional purchases beyond the $5 offering.
However, profitability will hinge on various factors, including ingredient costs, labor expenses, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, described the deal as “more promotional than profitable.” While it could draw diners back in, it may not guarantee profits for franchise owners.
About 95% of McDonald’s locations are franchisee-owned, meaning these owners set their own prices and face extra costs, such as rent, insurance, permits, and taxes. Joe Erlinger, McDonald’s U.S. president, mentioned in May that franchisees often implement promotional offerings like the $5 meal deal to help offset such overhead expenses.
However, Spiegel noted that the deal functions more as a “loss leader” to attract and retain customers. After accounting for costs related to labor, packaging, condiments, delivery, and marketing, she indicated that franchise owners effectively eliminate any potential profits from the items included in the deal.