McDonald’s is anticipated to generate 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 for each meal sold, as reported by restaurant analyst Mark Kalinowski.
Kalinowski noted that the promotion aims to attract consumers who are feeling the pinch of inflation, encouraging them to visit the restaurant, with the hope that they will purchase additional items beyond the $5 meal.
However, the potential for profit is influenced by several factors, including the costs of ingredients, labor, and overhead expenses. According to Arlene Spiegel, president of Arlene Spiegel & Associates, this initiative is considered “more promotional than profitable.”
She also pointed out that a significant majority of McDonald’s locations are franchise-owned, accounting for roughly 95%. As a result, franchisees set their own prices and bear additional expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, the U.S. president of McDonald’s, mentioned that franchise owners employ promotional offers, like the $5 meal deal, to manage their overhead costs. Nonetheless, Spiegel remarked that the bundle functions mainly as a “loss leader,” aimed at attracting and retaining customers. Once costs related to labor, packaging, condiments, delivery, and marketing are considered, franchise owners often find that any potential profits from the deal are eliminated.