McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated to range from 1% to 5%, translating to approximately $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
This promotion is aimed at attracting inflation-weary consumers back into the restaurants, with the hope that once inside, they will be inclined to purchase additional items beyond the $5 offer. However, the overall profitability will be influenced by a variety of factors, including ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, characterizes the $5 meal deal as “more promotional than profitable.” She notes that even if the deal succeeds in drawing customers back, franchise owners – who comprise about 95% of McDonald’s locations – may not see significant profits. This is because franchisees set their own prices while managing increased costs such as rent, insurance, permits, and taxes.
In a statement from May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often offset these overhead costs by offering promotional deals like the $5 meal. Nonetheless, Spiegel emphasizes that the bundle functions primarily as a “loss leader” designed to attract and retain customers. Once additional expenses related to labor, packaging, condiments, delivery, and marketing are considered, franchise owners may find that they largely eliminate any potential profit from the items included in the deal.