McDonald’s may see a small profit from its $5 meal deal, but the margins will be modest. According to restaurant analyst Mark Kalinowski, the fast-food chain could realize a profit margin ranging from 1% to 5%, equating to about $0.05 to $0.25 for each meal sold.
Kalinowski noted that the promotion aims to attract consumers who are feeling the effects of inflation back into the restaurant, with hopes they will purchase additional items beyond the $5 offer. However, profitability will be influenced by various factors, including ingredient costs, labor, and overhead expenses.
Consulting firm president Arlene Spiegel referred to the $5 meal deal as “more promotional than profitable.” She explained that while it could draw customers into the restaurant, it might not ensure profits for franchise owners, who typically manage 95% of McDonald’s locations. These franchisees are responsible for setting their own prices and handling costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees often use promotional strategies like the $5 meal deal to address their overhead expenses. Nevertheless, Spiegel stated that the meal bundle acts more as a “loss leader” intended to attract and retain customers. Once operational costs, including labor, packaging, condiments, delivery, and marketing, are accounted for, the potential profits for franchise owners could be significantly diminished.