McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins projected to range between 1% and 5%, translating to approximately $0.05 to $0.25 per bundle sold, as noted by restaurant analyst Mark Kalinowski.
This meal deal is part of McDonald’s strategy to attract consumers who are feeling the pinch of inflation. The chain hopes that once customers are drawn in by the $5 offer, they will purchase additional items. However, profitability is contingent on several factors, including the costs of ingredients, labor, and other overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, emphasized that the $5 meal deal serves primarily as a promotional tool rather than a lucrative offer. She added that while the combo might entice diners back to the restaurant, franchise owners may not fully benefit from the associated profits.
With approximately 95% of McDonald’s locations being franchise-owned, individual owners have the discretion to set their prices while also managing various expenses like rent, insurance, permits, and taxes.
Joe Erlinger, the president of McDonald’s U.S. operations, mentioned in May that franchisees often implement promotional deals, such as the $5 meal offering, to help offset their overhead costs. Nevertheless, Spiegel described the bundle as a “loss leader,” aimed primarily at attracting and retaining customers. She indicated that once the costs of labor, packaging, condiments, delivery, and marketing are accounted for, franchise owners often find that any potential profit from the deal is significantly diminished.