McDonald’s is expected to see only a modest profit margin from its $5 meal deal, likely between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski. This promotion aims to attract price-sensitive consumers who have been affected by inflation, encouraging them to make additional purchases beyond the $5 offer.
However, the profitability of this deal hinges on various factors including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, characterized the meal deal as “more promotional than profitable.”
Despite the potential for increased foot traffic, franchisees may not benefit significantly from these promotions, as roughly 95% of McDonald’s locations are franchise-owned. Franchise owners are responsible for their pricing and incur additional costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, noted that franchisees often run promotional offers like the $5 meal deal to manage overhead costs. Nevertheless, Spiegel pointed out that the deal acts primarily as a “loss leader to capture and re-capture guests,” and after accounting for expenses related to labor, packaging, condiments, delivery, and marketing, franchise owners may ultimately see little to no profit from the deal.