McDonald’s is expected to achieve only a modest profit from its $5 meal deal, with profit margins estimated to range 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 this pricing strategy is part of McDonald’s efforts to entice inflation-burdened consumers back into its outlets, encouraging them to purchase more items beyond the $5 meal. However, profitability will rely on various factors such as ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, stated that the $5 meal deal is “more promotional than profitable.” She further shared that while the deal might draw customers in, it does not guarantee profits for franchisees.
Approximately 95% of McDonald’s locations are owned by franchisees, who set their own pricing and incur additional costs, including rent, insurance, permits, and taxes. In a statement from May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often use promotional offers like the $5 meal to alleviate overhead costs.
Spiegel added that the meal bundle serves primarily as a “loss leader to capture and re-capture guests.” After accounting for expenses such as labor, packaging, condiments, delivery, and marketing, she stated that franchise owners effectively eliminate any potential profit from the items included in the deal.