McDonald’s is anticipated to generate a modest profit from its $5 meal deal, with profit margins estimated to range between 1% and 5%, translating to earnings of approximately $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
This promotion is part of McDonald’s strategy to entice consumers who are feeling the effects of inflation to visit their restaurants. The hope is that once customers are drawn in by the offer, they will purchase additional items beyond the $5 deal.
However, profitability is influenced by several external factors, including ingredient costs, labor expenses, and overhead costs. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, noted that the $5 meal deal is primarily aimed at attracting customers rather than generating significant profit.
Additionally, with around 95% of McDonald’s locations being franchise-owned, the individual franchisees set their own prices and must manage various costs, including rent, insurance, permits, and taxes.
In a statement made in May, Joe Erlinger, McDonald’s U.S. president, explained that franchisees often employ promotional deals, like the $5 meal, as a way to offset overhead costs. Nevertheless, Spiegel emphasized that the deal acts as a “loss leader,” intended to draw in customers rather than significantly benefit franchise owners. After accounting for expenses such as labor, packaging, condiments, delivery, and marketing, it is likely that franchisee owners effectively eliminate any profit from the items included in the meal deal.