McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% to 5%, translating to earnings of about $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this deal aims to attract budget-conscious customers as inflation continues to impact spending, with the hope that these customers will purchase more items once inside the restaurant.
However, profitability will be influenced by various factors including the costs of ingredients, labor, and other operational expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Despite the potential to bring customers back, franchise owners might not directly benefit from these profits. Approximately 95% of McDonald’s locations are franchise-operated, meaning individual franchisees set their own prices and must manage ongoing expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, President of McDonald’s U.S., mentioned that franchisees use promotional offers like the $5 meal deal to help offset high overhead costs. Nevertheless, Spiegel indicated that the meal bundle functions primarily as a “loss leader” to attract customers, suggesting that once labor, packaging, condiments, delivery charges, and marketing costs are accounted for, the potential profits are effectively minimized for the franchise operators.