McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to earnings of approximately $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the meal deal is part of McDonald’s strategy to attract consumers who are feeling the pressure of inflation. The goal is to encourage additional purchases beyond the initial $5 offering.
However, profitability will be influenced by various factors, including the cost of ingredients, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, emphasized that the $5 meal deal is “more promotional than profitable.”
Although the deal may help draw customers back into the restaurants, it does not guarantee that franchise owners will see any profits, as around 95% of McDonald’s locations are franchise-operated. Franchisees are responsible for setting their own prices and must cover various costs such as rent, insurance, permits, and taxes.
In May, U.S. president of McDonald’s, Joe Erlinger, mentioned that franchisees often run promotional offers like the $5 meal deal to alleviate overhead costs. Nonetheless, Spiegel characterized the bundle as more of a “loss leader” aimed at attracting and retaining customers. When factoring in additional expenses like labor, packaging, condiments, delivery charges, and marketing, she indicated that franchise owners may ultimately eliminate any potential profit from the deal.