McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins projected to range from 1% to 5%, translating to approximately $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this initiative aims to attract consumers who are feeling the pinch of inflation back into the restaurants, with the hope that once inside, they will make additional purchases beyond the $5 offering.
However, the potential for profitability is influenced by various factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, remarked that the $5 meal deal is seen as “more promotional than profitable.”
While the promotion may draw diners back to McDonald’s, it does not guarantee that franchise owners will benefit financially. Approximately 95% of McDonald’s locations are operated by franchisees who determine their own prices and manage additional costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., stated that franchisees often employ promotional offers to offset overhead costs. Nevertheless, Spiegel emphasized that the meal deal serves more as a “loss leader” aimed at attracting customers rather than yielding significant profits. She pointed out that after accounting for labor, packaging, condiments, delivery charges, and marketing expenses, franchise owners may end up with little to no profit on the items included in the deal.