McDonald’s may see a slight profit from its $5 meal deal, with estimates suggesting a profit margin of between 1% and 5%. This translates to approximately $0.05 to $0.25 earned for each meal bundle sold, according to restaurant analyst Mark Kalinowski.
The fast-food chain aims to attract cost-conscious customers who are dealing with inflation. The strategy is to get these customers into the store with the budget-friendly meal and encourage them to purchase additional items.
However, the actual profitability of the deal will be influenced by various factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.”
Furthermore, the majority of McDonald’s locations—about 95%—are franchise-owned. This means that franchise owners independently determine their pricing and must contend with extra expenses like rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees are looking to alleviate overhead costs by offering promotions like the $5 meal. Nonetheless, Spiegel explained that while these deals may attract customers, they often act as “loss leaders” aimed at bringing people in and retaining them.
After accounting for additional costs such as labor, packaging, condiments, delivery, and marketing, franchise owners may find that the promotional meal deal does not yield a profit.