McDonald’s is poised to earn a modest profit from its $5 meal deal, likely ranging from 1% to 5%, which translates to approximately $0.05 to $0.25 per meal sold, according to restaurant analyst Mark Kalinowski.
This strategy aims to attract consumers who are feeling the effects of inflation, encouraging them to visit stores and potentially purchase more than just the $5 meal. However, profitability hinges on various factors, including the cost of ingredients, labor, and other overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, noted that the $5 deal is “more promotional than profitable.” Even if the promotion draws diners into the restaurant, franchisees may not benefit from the profits, as about 95% of McDonald’s locations are franchise-owned. This means franchisees set their own prices and cover additional expenses like rent, insurance, permits, and taxes.
In May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often run promotional offers like the $5 meal deal to offset these overhead costs. However, Spiegel referred to the deal as a “loss leader” meant to attract customers rather than generate profit. When factoring in expenses related to labor, packaging, condiments, delivery, and marketing, franchise owners may “basically wipe out any profit on any one or all of the items in the deal.”