McDonald’s is expected to earn a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to approximately $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski. The promotion aims to entice consumers who are feeling the pinch of inflation, hoping that once they enter the restaurant, they will make additional purchases beyond the $5 offer.
However, the profitability of this meal deal will hinge on various factors, including the costs of ingredients, labor, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal as “more promotional than profitable.”
While the deal may drive more customers into the restaurants, it is uncertain whether franchise owners will enjoy the benefits of any potential profits. Approximately 95% of McDonald’s locations are franchise-operated, meaning that franchisees determine their own pricing and face additional expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., noted that franchisees attempt to offset these overhead costs through promotional deals like the $5 meal. Despite this strategy, Spiegel indicated that the offer functions more as a “loss leader” intended to attract and retain customers. She pointed out that when taking into account labor, packaging, condiments, delivery charges, and marketing expenses, franchise owners could potentially eliminate any profit from the items included in the deal.