McDonald’s is expected to earn a modest profit from its $5 meal deal, with projections indicating a profit margin between 1% and 5%, translating to approximately $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
This meal deal is seen as a strategic move by McDonald’s to attract customers who are struggling with inflation. The hope is that once customers are in the restaurant for the $5 offering, they will also consider purchasing additional items.
However, the profitability of this meal deal will be influenced by various factors, including the cost of ingredients, labor, and other overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, suggests that the $5 meal deal is more of a promotional tactic than a significant source of profit.
Even if the meal deal successfully draws customers into the restaurant, it may not guarantee profits for franchisees. Approximately 95% of McDonald’s locations are franchise-operated, meaning that owners have the discretion to set their own prices while also managing the burden of additional costs such as rent, insurance, permits, and taxes.
In a recent statement, McDonald’s U.S. president Joe Erlinger noted that franchisees often use promotional offers like the $5 meal deal to help offset their overhead costs. Spiegel highlighted that, ultimately, the bundle acts as a “loss leader” aimed at attracting and retaining customers. Once all additional costs related to labor, packaging, condiments, delivery, and marketing are considered, franchise owners may find that they lose out on profits from the items offered in the deal.