McDonald’s is expected to see a modest profit from its new $5 meal deal, with profit margins ranging from 1% to 5%—equating to about $0.05 to $0.25 per meal sold, as noted by restaurant analyst Mark Kalinowski. This initiative aims to attract consumers who are feeling the effects of inflation, with hopes that once customers enter the restaurant, they will purchase additional items beyond the $5 offering.
Profitability hinges on various factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the meal deal as “more promotional than profitable.”
Moreover, the profits from this deal may not extend to franchise owners, who run around 95% of McDonald’s locations. These franchisees set their own prices and must manage extra costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, the U.S. president of McDonald’s, highlighted that franchisees frequently use promotional offers like the $5 meal deal to alleviate overhead expenses. However, Spiegel pointed out that the bundle acts more as a “loss leader to capture and re-capture guests.” When labor, packaging, condiments, delivery charges, and marketing costs are taken into account, the viability of securing profits on any of the items included in the deal diminishes significantly.