McDonald’s is expected to see only a modest profit from its new $5 meal deal, with profit margins anticipated to be between 1% and 5%. According to restaurant analyst Mark Kalinowski, this translates to earnings of approximately $0.05 to $0.25 for each meal sold.
Kalinowski noted that this deal aims to attract inflation-weary consumers back to McDonald’s locations, encouraging them to purchase more than just the $5 meal. However, the potential for profitability will be influenced by various factors, including the costs of ingredients, labor, and other overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She emphasized that while the bundle may draw customers back into restaurants, franchise owners may not necessarily benefit from the profits. With about 95% of McDonald’s locations being franchise-owned, the franchisees set their own pricing and must manage additional costs associated with rent, insurance, permits, and taxes.
In a statement earlier this year, McDonald’s U.S. president Joe Erlinger revealed that franchisees often implement promotional offers, like the $5 meal deal, to help offset these overhead costs. However, Spiegel characterized the deal as primarily serving as a “loss leader” designed to attract and retain customers. Once factors such as labor, packaging, condiments, delivery fees, and marketing costs are taken into account, franchise owners may find that they eliminate any profit margin associated with the meal deal.