McDonald’s may make some profit from its $5 meal deal, but it is expected to be quite limited. According to restaurant analyst Mark Kalinowski, the profit margin on this offering is anticipated to be between 1% and 5%, translating to approximately $0.05 to $0.25 for each meal sold.
Kalinowski noted that this deal is part of McDonald’s strategy to attract consumers who are feeling the strain of inflation, encouraging them to come back and hopefully purchase more items beyond the $5 meal. However, the actual profitability will be influenced by various factors, including ingredient costs, labor, and other overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She pointed out that just because the deal might draw customers back to the restaurants doesn’t guarantee that franchisees will benefit from the increased traffic. Nearly 95% of McDonald’s locations are franchise-owned, meaning that individual owners establish their own pricing and must manage additional expenses like rent, insurance, and taxes.
In a statement from May, Joe Erlinger, the president of McDonald’s U.S. operations, mentioned that franchisees often use promotional offers, like the $5 meal deal, to help offset their overhead costs. Still, Spiegel emphasized that the deal acts more as a “loss leader” to attract and retain customers. Once accounting for the extra expenses related to labor, packaging, condiments, delivery, and marketing, she concluded that franchise owners could effectively erase any potential profit from the items included in the deal.