McDonald’s is expected to see a modest profit from its $5 meal deal, with profit margins anticipated to be between 1% and 5%, equating to approximately $0.05 to $0.25 for each meal sold, according to analyst Mark Kalinowski. This deal aims to attract customers affected by inflation, with the hope that while they are in the restaurant, they will be encouraged to purchase more items beyond the $5 offer.
However, turning a profit on this deal will be influenced by various factors, including ingredient costs, labor expenses, and overall operational costs. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Despite the potential for increased customer visits, franchisees might not benefit from the anticipated profits. Approximately 95% of McDonald’s locations are operated by franchisees, who set their own prices and manage additional expenses such as rent, insurance, and taxes.
In May, McDonald’s U.S. president Joe Erlinger mentioned that franchise owners often implement promotional offers like the $5 meal to reduce overhead costs. However, Spiegel noted that the meal deal serves primarily as a “loss leader” aimed at attracting customers. Once costs for labor, packaging, condiments, delivery, and marketing are accounted for, she indicated that franchise owners often end up with minimal to no profit from the items included in the deal.