McDonald’s is anticipated to generate a modest profit from its $5 meal deal, with profit margins expected to range between 1% and 5%, translating to earnings of approximately $0.05 to $0.25 per meal bundle sold, according to restaurant analyst Mark Kalinowski.
This deal is part of McDonald’s strategy to attract inflation-weary consumers back into its restaurants, aiming to encourage them to purchase additional items beyond the $5 offering.
However, profitability will also depend on factors such as ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.” She noted that, despite the potential for increased foot traffic, franchise owners might not see a direct profit from the deal.
Approximately 95% of McDonald’s locations are franchise-owned, which allows individual owners to set their prices while managing costs such as rent, insurance, permits, and taxes. In May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often implement promotional offers like the $5 meal deal to offset these overhead expenses.
Spiegel emphasized that the meal bundle serves more as a “loss leader” designed to attract and retain customers. After considering the costs associated with labor, packaging, condiments, delivery, and marketing, she explained that franchise owners could effectively eliminate any profit from the items included in the deal.