McDonald’s is set to potentially earn a modest profit from its newly introduced $5 meal deal, with profit margins estimated between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold, as highlighted by restaurant analyst Mark Kalinowski.
Kalinowski noted that the meal deal is part of McDonald’s strategy to attract inflation-weary consumers back to their locations, with the hope that once inside, patrons will be tempted to purchase additional items beyond the $5 offering.
However, the actual profitability of this deal hinges on several variables, including the costs associated with ingredients, labor, and other operational expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, pointed out that the $5 meal deal is “more promotional than profitable.” She emphasized that while the meal may bring diners back, franchise owners might not see significant profits.
Approximately 95% of McDonald’s locations are franchised, meaning that individual owners determine their own pricing and must manage increased expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., stated that franchisees often implement promotional strategies like the $5 meal deal to help offset their overhead costs.
Despite the bundle’s aim to attract customers, Spiegel described it as a “loss leader,” intended to draw in and retain diners. She explained that when accounting for added expenses related to labor, packaging, condiments, delivery, and marketing, franchise owners may end up negating any profits from the deal.