McDonald’s is expected to generate modest profits from its $5 meal deal, with profit margins estimated between 1% and 5%. This translates to a profit of approximately $0.05 to $0.25 for each meal bundle sold, according to restaurant analyst Mark Kalinowski.
The fast-food giant aims to attract consumers who are feeling the impact of inflation, hoping that once they visit the restaurant for the budget-friendly deal, they will spend more on additional items. However, the actual profitability of this deal could be influenced by various factors, including the cost of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She noted that even if the promotion succeeds in bringing customers into the restaurant, franchise owners may not see increased profits from it. Approximately 95% of McDonald’s locations are owned by franchisees, who have the autonomy to set their own prices and must manage various costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often try to offset these overhead costs through promotional offers like the $5 meal deal. Still, Spiegel pointed out that the deal is primarily a “loss leader” intended to draw and retain customers. When including additional costs like labor, packaging, condiments, delivery fees, and marketing, she indicated that franchise owners may effectively eliminate any profit from the items included in the offer.