McDonald’s is expected to see a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to about $0.05 to $0.25 per bundle sold, as reported by restaurant analyst Mark Kalinowski.
Kalinowski noted that this deal is part of McDonald’s strategy to attract inflation-weary consumers back into their restaurants, with the hope that once inside, customers will purchase additional items beyond the $5 offer.
However, profitability will depend on various factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal as “more promotional than profitable.”
While the promotion may draw diners to the restaurant, it doesn’t guarantee that franchise owners will share in those profits, as approximately 95% of McDonald’s locations are franchise-owned. This means franchisees set their own prices and deal with extra costs such as rent, insurance, permits, and taxes.
In a previous statement, McDonald’s U.S. president Joe Erlinger indicated that franchisees utilize promotional offers like the $5 meal deal to mitigate their overhead expenses. Nonetheless, Spiegel emphasized that the bundle often serves as a “loss leader” to attract and retain customers, suggesting that once costs for labor, packaging, condiments, delivery, and marketing are considered, franchise owners may not realize any profit from the deal.