McDonald’s may see a modest profit from its $5 meal deal, with expected profit margins ranging from 1% to 5%, translating to approximately $0.05 to $0.25 for each bundle sold, as stated by restaurant analyst Mark Kalinowski. The fast food chain intends to attract inflation-sensitive consumers with this offering, hoping that customers will purchase more than just the $5 meal once they enter the store.
However, profitability is contingent upon various factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.”
Additionally, while the meal deal might attract patrons back into the restaurant, it may not lead to significant profits for franchisees, who own roughly 95% of McDonald’s locations. Franchisees independently set prices and bear additional costs such as rent, insurance, permits, and taxes.
In response to rising overhead costs, franchisees, according to McDonald’s U.S. president Joe Erlinger, often implement promotional offers like the $5 meal deal. Despite this strategy, Spiegel emphasized that the bundle serves primarily as a “loss leader to capture and re-capture guests.” Once factoring in the costs of labor, packaging, condiments, delivery charges, and marketing, she indicated that franchise owners could ultimately negate any profit from the deal.