McDonald’s is expected to earn only a modest profit from its $5 meal deal, with profit margins anticipated to be between 1% and 5%. This equates to a profit of approximately $0.05 to $0.25 for each meal bundle sold, as noted by restaurant analyst Mark Kalinowski.
Kalinowski indicated that this meal deal is a strategy by McDonald’s to attract cost-conscious consumers who have been affected by inflation, with the goal of encouraging them to make additional purchases beyond the $5 offering.
However, the potential profitability of this deal will be influenced by various factors, including the costs associated with ingredients, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Additionally, while the deal may help draw diners back into the restaurants, it may not necessarily translate into greater profits for franchise owners. Approximately 95% of McDonald’s locations are franchisee-run, meaning these owners set their own prices and bear the burden of extra costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often utilize promotional offers to help manage these overhead expenses. Nonetheless, Spiegel emphasized that the meal deal primarily serves as a “loss leader” intended to attract and retain customers. After accounting for labor, packaging, condiments, delivery fees, and marketing expenditures, franchise owners often find that any potential profit on the items included in the deal is essentially eliminated.