McDonald’s is anticipated to generate a small profit from its $5 meal deal, with profit margins projected to range from 1% to 5%. This translates to earnings of approximately $0.05 to $0.25 per meal, as noted by restaurant analyst Mark Kalinowski.
The fast-food giant sees this deal as a strategy to attract consumers who are feeling the pinch of inflation, hoping that once customers are inside the restaurant, they will purchase additional items beyond the $5 offer.
However, profitability is contingent upon several factors, including ingredient costs, labor, and overall operating expenses. According to Arlene Spiegel, president of Arlene Spiegel & Associates, the $5 meal deal is “more promotional than profitable.”
Even if the deal succeeds in drawing diners back, franchise owners may not benefit significantly from the profits, as approximately 95% of McDonald’s locations are franchise-owned, where individual owners set their own prices and manage additional expenses like rent, insurance, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S. operations, mentioned that franchisees often run promotional offers, like the $5 meal deal, to alleviate overhead costs. Still, according to Spiegel, this bundle serves primarily as a “loss leader to capture and re-capture guests.”
After considering the costs associated with labor, packaging, condiments, delivery, and marketing, she expressed that franchise owners might end up losing any potential profit from the items included in the deal.