McDonald’s is expected to achieve only a modest profit from its $5 meal deal, with profit margins predicted to be between 1% and 5%. This translates to earnings of approximately $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the meal deal is part of McDonald’s strategy to attract cost-conscious consumers who are feeling the impact of inflation. The hope is that once customers enter the restaurant, they will purchase additional items beyond the $5 meal.
However, achieving profitability hinges on various factors, including the prices of ingredients, labor costs, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, indicated that the $5 meal deal is more of a marketing promotion than a significant profit generator.
Although the meal deal may bring diners back to McDonald’s, it does not guarantee profits for franchise owners. About 95% of McDonald’s locations are franchise-operated, which means these owners determine their own pricing and must manage extra costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., explained that franchisees often employ promotional deals like the $5 meal to help offset their overhead costs. However, according to Spiegel, this bundle can be considered a “loss leader” intended to attract and retain customers. She warned that when you account for the various expenses such as labor, packaging, condiments, delivery fees, and marketing, franchise owners typically eliminate any potential profit from the items included in the meal deal.