McDonald’s is anticipated to see modest profits from its $5 meal deal, with profit margins expected to range between 1% and 5%. This translates to approximately $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski.
The fast food giant is leveraging this deal in an effort to attract inflation-weary consumers back to its restaurants, with the hope that once customers are inside, they will make additional purchases beyond the $5 meal.
However, actual profitability will be influenced by a variety of factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.”
It’s important to highlight that with around 95% of McDonald’s locations being franchise-owned, individual owners set their prices and manage extra costs such as rent, insurance, permits, and taxes. In May, Joe Erlinger, McDonald’s U.S. president, pointed out that franchisees often use promotional offers like the $5 deal to offset their overhead expenses.
Nevertheless, Spiegel emphasized that this meal bundle acts as a “loss leader” aimed at attracting and retaining customers. Once additional costs from labor, packaging, condiments, delivery charges, and marketing are considered, franchise owners may find that they “essentially wipe out any profit” on the items included in the deal.