McDonald’s is set to introduce a $5 meal deal, which is expected to yield only a modest profit margin between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski. The fast-food giant is utilizing this strategy to attract inflation-weary consumers back to its outlets, with hopes that customers will also make additional purchases beyond the promotional offer.
However, the profitability of this deal is contingent on various factors, including ingredient costs, labor expenses, and overheads. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, emphasizes that the $5 meal deal is “more promotional than profitable.”
Moreover, while the deal may drive traffic into the stores, franchise owners are unlikely to benefit significantly from the profits, as approximately 95% of McDonald’s locations are franchisee-owned. Franchisees determine their own prices and must manage additional expenses such as rent, insurance, and taxes.
In May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often offer promotions like the $5 meal deal to offset these overhead costs. Still, Spiegel characterizes the bundle as a “loss leader” aimed at attracting and retaining customers. She further noted that when factoring in costs associated with labor, packaging, condiments, delivery, and marketing, franchise owners may essentially eliminate any profit from one or all items in the deal.