McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins ranging between 1% and 5%. This equates to approximately $0.05 to $0.25 for each meal bundle sold, according to restaurant analyst Mark Kalinowski.
The fast-food chain aims to attract consumers who are feeling the effects of inflation, with the hope that they will make additional purchases beyond the $5 meal. However, profitability will be influenced by several factors, including ingredient costs, labor expenses, and overhead costs.
Consultant Arlene Spiegel noted that the $5 meal deal is primarily seen as a promotional strategy rather than a profitable venture. She pointed out that while the deal may help in bringing customers back to the restaurant, the profits may not trickle down to franchise owners.
Approximately 95% of McDonald’s locations are franchise-owned, which means each owner sets their own prices and bears various expenses like rent, insurance, permits, and taxes. In a recent statement, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often utilize promotional offers, like the $5 meal deal, to offset operational costs.
However, Spiegel emphasized that this meal deal acts more as a “loss leader” aimed at attracting and retaining customers. When additional costs for labor, packaging, condiments, delivery, and marketing are accounted for, owners often find that the deal erases any potential profits on the various items included.