McDonald’s is expected to make a modest profit from its $5 meal deal, with profit margins projected to be between 1% and 5%. This translates to earnings of approximately $0.05 to $0.25 for each meal combo sold, according to restaurant analyst Mark Kalinowski.
The promotion aims to attract consumers who are feeling the effects of inflation, with the goal of encouraging them to make additional purchases beyond the $5 meal option.
However, profitability will be influenced by several variables, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is more about promotion than significant profit.
Although the deal may drive customers back into McDonald’s outlets, it doesn’t guarantee that franchisees will share in the financial benefits. Approximately 95% of McDonald’s locations are franchised, which means the franchise owners set their own prices and manage expenses such as rent, insurance, and taxes.
In a previous statement, McDonald’s U.S. president Joe Erlinger mentioned that franchise owners often implement promotional offers like the $5 meal deal to combat overhead costs. However, Spiegel cautioned that the bundle serves primarily as a “loss leader” aimed at attracting customers. Once the various costs associated with labor, packaging, condiments, delivery, and marketing are considered, franchise owners typically find that any potential profit from the promotional items is negligible.