McDonald’s is expected to see a modest profit from its $5 meal deal, with profit margins projected to be between 1% and 5%, equating to approximately $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
The fast-food giant aims to attract inflation-weary customers back into its restaurants with the deal, hoping that once they enter, they will purchase additional items beyond the $5 offering. However, the profitability of the deal hinges on various factors, including ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, emphasized that the $5 meal deal is “more promotional than profitable.” She noted that while bringing diners back to the restaurant is beneficial, it doesn’t guarantee that franchisees will see those profits.
Approximately 95% of McDonald’s locations are franchise-owned, meaning that individual owners determine their own pricing and manage extra costs associated with rent, insurance, permits, and taxes. In May, McDonald’s U.S. president Joe Erlinger indicated that franchisees are trying to manage overhead by offering promotions like the $5 meal deal.
Nonetheless, Spiegel described the bundle more as a “loss leader to capture and re-capture guests.” After accounting for the additional expenses related to labor, packaging, condiments, delivery, and marketing, owners often find that their potential profits from the deal are significantly diminished.