McDonald’s is expected to generate a modest profit from its $5 meal deal, with projected profit margins ranging from 1% to 5%, equating to approximately $0.05 to $0.25 for each bundle sold, as noted by restaurant analyst Mark Kalinowski.
The introduction of this deal is part of McDonald’s strategy to attract inflation-weary consumers back to their restaurants, with the hope that once inside, customers will purchase more than just the $5 meal. However, profitability will be influenced by a variety of factors, including ingredient costs, labor expenses, and overhead.
Arlene Spiegel, president of Arlene Spiegel & Associates, commented that the $5 meal deal is “more promotional than profitable.” Although it may draw diners back, franchise owners may not necessarily experience the financial benefits. Around 95% of McDonald’s locations are franchisee-owned, leading these owners to set their own pricing and manage additional costs such as rent, insurance, and taxes.
In comments from May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees often employ promotional offers like the $5 meal to offset these overhead costs. However, Spiegel emphasized that the deal acts primarily as a “loss leader” aimed at attracting customers. Given the associated labor costs, packaging, condiments, delivery, and marketing expenses, she asserted that franchise owners are likely to eliminate any potential profits from the items included in the deal.