McDonald’s is expected to make a modest profit from its $5 meal deal, with profit margins projected to be between 1% and 5%, equating to approximately $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski.
This promotional offer is aimed at attracting inflation-weary customers back to the fast-food chain, with hopes that once patrons are inside, they will purchase additional items beyond the $5 deal.
However, profitability will also hinge on various factors including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, noted that the $5 meal deal is more of a marketing strategy than a source of profit.
Despite the potential to draw diners back into restaurants, the financial benefits may not extend to franchisees. Approximately 95% of McDonald’s locations are franchisee-owned, which means individual owners set their own pricing and bear extra costs such as rent, insurance, permits, and taxes.
In a statement made in May, McDonald’s U.S. president Joe Erlinger indicated that franchisees often implement promotional initiatives like the $5 meal deal to help offset their overhead costs. Nonetheless, Spiegel remarked that the deal functions more as a “loss leader” intended to attract and retain customers. When considering the additional expenses of labor, packaging, condiments, delivery, and marketing, she asserted that franchise owners may effectively eliminate any profit margin from the items in the deal.