McDonald’s is expected to see a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski. This promotional offering aims to attract inflation-weary consumers back into the restaurant, with hopes that they will purchase more items once they visit.
However, the overall profitability of the meal deal will hinge on various factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
While the meal deal might draw customers back to McDonald’s locations, franchise owners might not see significant profits from it. Currently, about 95% of McDonald’s locations are franchise-owned, meaning that these owners set their own prices and are responsible for additional expenses such as rent, insurance, permits, and taxes.
In comments made in May, Joe Erlinger, McDonald’s U.S. president, noted that franchisees attempt to offset their overhead costs through promotional offers like the $5 meal deal. Nonetheless, Spiegel referred to the bundle as a “loss leader” meant to attract and retain customers. When considering the added costs for labor, packaging, condiments, delivery, and marketing, she pointed out that owners might ultimately eliminate any potential profit from the deal.