McDonald’s is anticipating a modest profit from its $5 meal deal, with expected profit margins ranging between 1% and 5%, translating to approximately $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski.
This meal deal is part of McDonald’s strategy to draw back inflation-weary customers, encouraging them to make additional purchases beyond the $5 offering. However, the profitability of this initiative largely hinges on various factors, including ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She noted that while the deal may attract diners back into McDonald’s locations, franchisees may not see these profits directly. With about 95% of McDonald’s outlets being franchise-owned, the franchisees set their own prices and are responsible for various costs such as rent, insurance, permits, and taxes.
Joe Erlinger, McDonald’s U.S. president, stated in May that franchisees often use promotional offers like the $5 meal deal to help manage their overhead costs. However, Spiegel highlighted that this deal serves primarily as a “loss leader” to attract and retain customers. When considering the additional costs associated with labor, packaging, condiments, delivery, and marketing, franchise owners may effectively eliminate any potential profits from the items included in the deal.