McDonald’s is expected to achieve only a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to approximately $0.05 to $0.25 per meal sold, according to restaurant analyst Mark Kalinowski.
This pricing strategy is designed to attract consumers who are feeling the pinch of inflation, with the hope that once they enter the restaurant, they will purchase additional items beyond the $5 offering.
However, the actual profitability will be influenced by various factors including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, characterized the deal as “more promotional than profitable.”
While the meal deal may drive customers back into McDonald’s locations, franchisees may not benefit directly from the profits, given that approximately 95% of McDonald’s restaurants are franchise-owned. Franchisees manage their pricing and shoulder various expenses such as rent, insurance, permits, and taxes.
In a statement in May, McDonald’s U.S. president Joe Erlinger noted that franchisees frequently implement promotional offers like the $5 meal deal to offset overhead costs. Despite this, Spiegel indicated that the value meal functions more as a “loss leader” aimed at attracting customers. After considering additional expenses, including labor, packaging, condiments, delivery charges, and marketing, she emphasized that franchise owners might ultimately negate any profit from the deal.