McDonald’s is expected to see a modest profit from its new $5 meal deal, potentially ranging from 1% to 5%, translating to earnings of about $0.05 to $0.25 per meal sold, according to analyst Mark Kalinowski.
This meal deal is part of the fast-food chain’s strategy to attract price-sensitive consumers amid rising inflation, encouraging them to purchase additional items once they are in the store. However, the profitability of the meal relies on various factors, including the costs of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as more of a promotional tool than a significant revenue generator. She noted that even if the deal successfully draws customers back, it may not result in substantial profits for franchise owners.
With approximately 95% of McDonald’s locations being franchise-owned, individual owners determine their own pricing and manage expenses such as rent, insurance, permits, and taxes. McDonald’s U.S. president Joe Erlinger stated in May that franchisees often offer promotions like the $5 meal deal to offset these overhead costs.
Spiegel elaborated that the deal serves as a “loss leader” aimed at attracting and retaining customers. When considering the added costs associated with labor, packaging, condiments, delivery, and marketing, she indicated that franchise owners might essentially eliminate any profit from the items included in the meal deal.