McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins anticipated to range from 1% to 5%. This translates to earnings of approximately $0.05 to $0.25 for each bundle sold, as detailed by restaurant analyst Mark Kalinowski.
Kalinowski noted that this promotion aims to attract consumers feeling the pinch of rising inflation. The strategy is designed to encourage customers to come into the restaurants, with the hope that they will purchase additional items beyond the $5 offering.
However, actual profitability hinges on various factors including ingredient costs, labor expenses, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.”
She also mentioned that even if this deal successfully entices diners, franchisees may not benefit financially. Approximately 95% of McDonald’s locations are franchise-owned, allowing individual owners to set their own prices while managing additional costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, indicated that franchisees work to manage these overhead costs through promotional deals like the $5 meal. However, Spiegel labeled the option a “loss leader” meant to draw in customers. After accounting for various expenses such as labor, packaging, condiments, delivery, and marketing, she pointed out that owners often end up eliminating any profit from the items included in the deal.