McDonald’s is expected to achieve a modest profit from its recently introduced $5 meal deal, with profit margins estimated to be between 1% and 5%. This translates to approximately $0.05 to $0.25 earned for each bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski indicated that this promotional deal is designed to attract consumers who are feeling the pinch of inflation, encouraging them to enter the restaurant and potentially purchase additional items beyond the $5 offering.
However, the chain’s profitability will be influenced by various factors including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, remarked that the $5 meal deal is “more promotional than profitable.”
She cautioned that even if the deal successfully brings customers back, franchisees may not see significant profits. With approximately 95% of McDonald’s locations being franchise-owned, these owners set their own prices and deal with additional costs like rent, insurance, permits, and taxes.
McDonald’s U.S. president Joe Erlinger noted that franchisees often run promotional offers, such as the $5 meal deal, to help offset these overhead costs. Nevertheless, Spiegel described the bundle as more of a “loss leader” aimed at attracting and retaining customers. After accounting for labor, packaging, condiments, delivery fees, and marketing expenses, owners may find that they have eliminated any potential profits on the deal altogether.