McDonald’s is expected to generate a modest profit from its $5 meal deal, with margins estimated between 1% to 5%, translating to earnings of approximately $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski.
This promotional offering is part of McDonald’s strategy to attract inflation-weary customers back into stores, with hopes that they will purchase additional items beyond the deal. However, profitability will hinge on various factors, including the costs of ingredients, labor, and overhead.
Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is more of a promotional effort than a substantial profit-making opportunity. She pointed out that even if the deal succeeds in drawing in diners, franchise owners may not benefit significantly due to their responsibility for setting prices and dealing with additional costs such as rent, insurance, permits, and taxes.
About 95% of McDonald’s locations are franchise-owned, which adds complexity to profit generation through promotional offers. In May, McDonald’s U.S. president Joe Erlinger highlighted that franchisees utilize such promotions to help manage their overhead expenses. However, Spiegel emphasized that after accounting for labor, packaging, condiments, delivery charges, and marketing, the bundle may effectively eliminate profits from the items included in the deal.