McDonald’s is expected to earn a modest profit from its $5 meal deal, with profit margins estimated to range from 1% to 5%, translating to approximately $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
The fast-food giant seeks to attract inflation-weary customers with this promotional offer. The strategy aims to entice diners not just to purchase the $5 meal but also to buy additional items once they are in the restaurant.
However, profitability will hinge on several factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, noted that the deal is “more promotional than profitable.”
Despite the potential to draw customers back, franchisees may not experience financial benefits from the offer. Approximately 95% of McDonald’s locations are franchisee-owned, meaning these owners set their own prices and must cover expenses such as rent, insurance, permits, and taxes.
Joe Erlinger, McDonald’s U.S. president, stated that franchisees often implement promotional deals like the $5 meal in an effort to manage overhead costs. However, Spiegel explained that this bundle acts more as a “loss leader” aimed at attracting and retaining customers. After considering labor, packaging, condiments, delivery, and marketing costs, she indicated that owners may effectively negate any profits from the meal deal.