McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to earnings of approximately $0.05 to $0.25 per meal sold, as indicated by restaurant analyst Mark Kalinowski.
This initiative aims to attract consumers who are struggling with inflation back into the restaurant, with the hope that they will purchase additional items beyond the $5 offer. However, the actual profit will be influenced by various factors, including the costs of ingredients, labor, and overhead expenses.
Consulting firm president Arlene Spiegel described the $5 meal deal as “more promotional than profitable.” She noted that even if this combo attracts more diners, franchise owners might not benefit from the profits due to the nature of their business model, where approximately 95% of McDonald’s locations are franchise-owned. These owners control their own pricing and must grapple with extra costs such as rent, insurance, permits, and taxes.
In May, McDonald’s U.S. president Joe Erlinger acknowledged that franchisees often run promotional offers like the $5 meal deal to manage their overhead costs. Nonetheless, Spiegel emphasized that the deal acts as a “loss leader” designed to bring customers in and keep them returning. After accounting for additional expenses such as labor, packaging, condiments, delivery charges, and marketing, she stated that franchisees may eliminate any potential profits from the meal deal items.