McDonald’s is expected to earn a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%. This translates to approximately $0.05 to $0.25 for each deal sold, as noted by restaurant analyst Mark Kalinowski.
Kalinowski indicated that the promotion aims to attract customers who are feeling the strain of inflation, with the hope that they will purchase additional items beyond the $5 meal. However, the profitability of the deal will hinge on various factors, including the costs of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, remarked that the $5 meal deal is “more promotional than profitable.” She pointed out that even if the promotional offer brings customers back, the profits may not directly benefit the franchisees, who own about 95% of McDonald’s locations.
Franchise owners have the flexibility to set their prices and must manage various costs like rent, insurance, permits, and taxes. Joe Erlinger, president of McDonald’s U.S., commented in May that franchisees often employ promotional deals like the $5 meal to help manage these overhead expenses.
However, Spiegel noted that such promotional packages are typically “loss leaders” designed to attract customers. Once costs for labor, packaging, condiments, delivery, and marketing are considered, franchise owners may end up eliminating any profits from the items included in the deal.