McDonald’s stands to earn a modest profit from its $5 meal deal, with margins expected to range between 1% and 5%. This translates to a profit of approximately $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this promotion is a strategy aimed at attracting consumers who are feeling the impact of inflation. The goal is not only to entice them to purchase the $5 deal but also to encourage additional spending once they are in the restaurant.
However, profitability hinges on various factors, including ingredient costs, labor, and overall operational expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Despite the potential to draw diners back in, Spiegel pointed out that franchise owners may not necessarily benefit from the profits. Approximately 95% of McDonald’s locations are franchised, meaning individual franchisees set their own prices and absorb various operating costs such as rent, insurance, permits, and taxes.
In May, U.S. President of McDonald’s Joe Erlinger mentioned that franchisees often implement promotional deals like the $5 meal to help manage these overhead costs. Nevertheless, Spiegel indicated that the $5 bundle serves more as a “loss leader” to attract customers rather than a significant revenue generator. When accounting for labor, packaging, condiments, delivery fees, and marketing expenses, she noted that franchise owners often eliminate any profit associated with the items included in the deal.