McDonald’s is anticipated to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%. This translates to a profit of approximately $0.05 to $0.25 for each meal bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the meal deal is part of McDonald’s strategy to attract inflation-weary consumers back to their locations, hoping that once customers are in the restaurant, they will purchase additional items beyond the $5 offering.
However, profitability will hinge on various factors, including the costs of ingredients, labor, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, commented that the $5 meal deal is more of a promotional strategy than a significant revenue generator.
She pointed out that while the deal may bring diners back, franchisees may not experience the resulting profits. Approximately 95% of McDonald’s locations are franchise-owned, meaning franchisees set their own prices and are responsible for managing extra expenses such as rent, insurance, permits, and taxes.
In comments made in May, McDonald’s U.S. president Joe Erlinger indicated that franchisees often use promotions, such as the $5 meal deal, to counteract overhead costs. Nonetheless, Spiegel described the meal bundle as a “loss leader” aimed at attracting and retaining customers.
After accounting for additional expenses such as labor, packaging, condiments, delivery charges, and marketing costs, Spiegel asserted that owners typically eliminate any profitability on the items included in the deal.