McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%. This equates to approximately $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the meal deal aims to attract price-sensitive consumers back to McDonald’s, hoping that once inside, they may purchase additional items beyond the $5 offer.
However, profitability will be influenced by various factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates consulting firm, described the meal deal as “more promotional than profitable.”
Despite the effort to draw customers into the restaurant, Spiegel highlighted that franchise owners, who operate about 95% of McDonald’s locations, may not necessarily benefit from these profits. Franchisees determine menu prices and bear additional expenses like rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees utilize promotional deals, like the $5 meal, to counterbalance overhead costs. Nonetheless, Spiegel remarked that the bundle primarily serves as a “loss leader” designed to attract and retain customers. She stated that when factoring in the costs of labor, packaging, condiments, delivery, and marketing, franchise owners could effectively eliminate any profit from the deal.