McDonald’s is expected to gain a modest profit from its $5 meal deal, with margins likely ranging from 1% to 5%, translating to approximately $0.05 to $0.25 for each bundle sold. Restaurant analyst Mark Kalinowski noted that this promotional strategy aims to attract consumers who are feeling the effects of inflation and encourage them to purchase more items once they are in the restaurant.
However, profitability is contingent on various factors, including the costs associated with ingredients, labor, and overhead expenses. According to Arlene Spiegel, president of Arlene Spiegel & Associates, the $5 meal deal is “more promotional than profitable,” indicating that its primary purpose is to draw customers rather than significantly bolster profits.
The situation becomes more complex for franchise owners, who make up roughly 95% of McDonald’s restaurants. These owners determine their own pricing while managing various expenses such as rent, insurance, permits, and taxes. In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees use promotional offers like the $5 deal to help offset these higher overhead costs.
Despite the potential for increased customer traffic, Spiegel cautioned that the meal deal functions primarily as a “loss leader” aimed at attracting and retaining customers. She highlighted that once factors like labor costs, packaging, condiments, delivery fees, and marketing expenses are taken into account, franchise owners may find that profits from the meal deal are negligible or nonexistent.