McDonald’s is introducing a $5 meal deal that is expected to yield only a modest profit margin. According to restaurant analyst Mark Kalinowski, the fast food chain could see profit margins ranging from 1% to 5%, equating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski emphasized that the offer is part of McDonald’s strategy to attract inflation-weary consumers back into their restaurants, with the hope that once customers are inside, they will make additional purchases beyond the $5 deal.
However, profitability will hinge on various factors, including ingredient costs, labor expenses, and overall overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She noted that while it may draw diners back, it doesn’t guarantee profits for franchisees.
With around 95% of McDonald’s locations being franchisee-operated, individual owners have the liberty to set their own prices and bear the burden of additional costs such as rent, insurance, permits, and taxes. Joe Erlinger, president of McDonald’s U.S., previously stated that franchisees often use promotional deals to help offset these overheads.
Nonetheless, Spiegel pointed out that the meal deal functions more as a “loss leader” aimed at attracting and retaining customers. After accounting for various costs including labor, packaging, condiments, delivery charges, and marketing, franchise owners might find that any potential profit from the meal deal is effectively diminished.