McDonald’s is expected to see minimal profits from its $5 meal deal, with profit margins likely between 1% and 5%, translating to gains of about $0.05 to $0.25 per meal, according to restaurant analyst Mark Kalinowski. This initiative aims to attract consumers who are feeling the pinch of inflation and encourage them to purchase more than just the $5 meal.
However, turning a profit will be contingent on various factors including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the meal deal as “more promotional than profitable.”
Even if the deal successfully draws customers back to the restaurant, franchisees may not see significant profits. Approximately 95% of McDonald’s locations are franchise-owned, meaning that individual owners set their prices and face various additional costs like rent, insurance, and taxes.
In May, McDonald’s U.S. president Joe Erlinger noted that franchisees often implement promotional deals, such as the $5 meal, to help manage these overhead costs. However, Spiegel emphasized that the meal bundle functions more as a “loss leader” to attract and retain customers. Once the various expenses, including labor, packaging, and marketing, are accounted for, franchise owners may eliminate any profits from the items included in the deal.