McDonald’s is poised to achieve a modest profit from its $5 meal deal, with expected profit margins ranging from 1% to 5%, translating to approximately $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
This initiative aims to attract inflation-weary customers back into their restaurants, encouraging them to purchase more than just the $5 meal. However, the overall profitability of the deal hinges on several factors, including ingredient costs, labor expenses, and other overheads.
Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.” While it may bring diners back, it does not guarantee that franchisees will benefit financially. Approximately 95% of McDonald’s locations are franchise-owned, meaning that owners set their own prices and face various additional costs, such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, indicated that franchisees utilize promotional strategies like the $5 meal deal to counteract these overheads. Nevertheless, Spiegel noted that the combination offers might serve more as a “loss leader” to attract and retain customers. Once costs related to labor, packaging, condiments, delivery, and marketing are considered, franchise owners often find that they effectively eliminate any potential profit from the meal offerings.