McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
This promotional deal aims to attract inflation-burdened consumers back to the restaurant, hoping they will make additional purchases beyond the $5 offering. However, the actual profitability of the deal will hinge on various factors including the costs of ingredients, labor, and overall overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.” She noted that even if the offer entices diners to visit, franchise owners may not benefit from the profits.
Approximately 95% of McDonald’s locations are franchise-owned, meaning that franchisees set their prices and must cover several operating costs, including rent, insurance, permits, and taxes. In May, Joe Erlinger, McDonald’s U.S. president, stated that franchisees often attempt to alleviate overhead costs by offering promotions like the $5 meal deal.
However, Spiegel emphasized that the bundle primarily serves as a “loss leader” designed to attract customers. Once costs related to labor, packaging, condiments, delivery, and marketing are accounted for, she argued that franchise owners essentially eliminate any potential profit from the deals.