McDonald’s is expected to achieve only a modest profit from its $5 meal deal, with estimates suggesting a profit margin of between 1% and 5%. This translates to approximately $0.05 to $0.25 earned for each meal bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the meal deal is part of McDonald’s strategy to attract inflation-weary consumers back to its restaurants, with the hope that once they are inside, they will purchase additional items beyond the $5 offering.
Profitability for the meal deal will hinge on various factors, including the cost of ingredients, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, emphasized that the $5 meal deal is more promotional than profitable.
Moreover, even if the deal successfully lures customers back into the restaurant, franchisees may not see these profits. Approximately 95% of McDonald’s locations are franchisee-owned, meaning that individual owners set their own prices and bear significant costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, remarked that franchisees often utilize promotional offers, like the $5 meal deal, to manage overhead costs. However, Spiegel characterized the bundle as a “loss leader,” aimed at attracting and retaining customers.
When considering additional expenses such as labor, packaging, condiments, delivery charges, and marketing, Spiegel indicated that franchise owners may effectively erase any potential profit from the deal.