McDonald’s is expected to achieve a modest profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%. This translates to approximately $0.05 to $0.25 per meal sold, according to restaurant analyst Mark Kalinowski.
The $5 offering is part of McDonald’s strategy to attract consumers who are feeling the pinch of inflation, hoping that once customers enter the restaurant, they will purchase additional items beyond the meal deal.
However, the profit from this deal will depend on various factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the meal deal as “more promotional than profitable.”
She noted that while it might attract diners back to the restaurant, franchise owners, who operate about 95% of McDonald’s locations, may not experience the benefits directly. Franchisees set their own prices and bear additional expenses such as rent, insurance, and taxes.
In a statement from May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often implement promotional offers like the $5 meal deal to manage their overhead costs. However, Spiegel emphasized that the deal functions more as a “loss leader” aimed at drawing in and retaining customers. When considering the additional expenses associated with labor, packaging, and marketing, franchise owners often find that any potential profit from the deal is significantly diminished.