McDonald’s is set to potentially generate modest profits from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to earnings of about $0.05 to $0.25 per meal bundle, according to restaurant analyst Mark Kalinowski.
This meal deal is part of McDonald’s strategy to attract consumers who are feeling the impact of inflation, hoping that once customers come in for the deal, they will purchase additional items. However, the actual profitability of this deal will be influenced by various factors, including the costs of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.” While the deal may draw customers into the store, it does not guarantee that franchise owners will benefit from the profits. Notably, around 95% of McDonald’s locations are franchisee-owned, and these owners manage their own pricing and are responsible for covering various costs such as rent, insurance, permits, and taxes.
In a prior statement, Joe Erlinger, the president of McDonald’s U.S., mentioned that franchisees often rely on promotional offers like the $5 meal to help manage overhead costs. Nevertheless, Spiegel emphasized that this bundle serves more as a “loss leader” aimed at attracting and retaining customers. After accounting for expenses, including labor, packaging, condiments, delivery charges, and marketing, franchise owners often find that their potential profits from the deal are significantly reduced or eliminated altogether.