McDonald’s is anticipated to generate a modest profit from its $5 meal deal, with profit margins projected between 1% and 5%, equating to approximately $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
The fast-food giant aims to attract inflation-weary customers back to its locations with this offer, hoping once patrons are in the door, they may purchase additional items beyond the $5 meal. However, profitability hinges on various factors including ingredient costs, labor expenses, and overhead.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as being “more promotional than profitable.” She noted that even if the promotion draws in customers, it may not translate into profits for franchisees, who own about 95% of McDonald’s locations. Franchise owners set their own prices and must deal with costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, stated that franchisees utilize promotional offers, like the $5 deal, to manage those overhead expenses. Spiegel further emphasized that the bundle serves primarily as a “loss leader” aimed at attracting and retaining customers. After accounting for labor, packaging, condiments, delivery fees, and marketing expenses, she mentioned that franchise owners often end up eliminating any profit from the items included in the deal.