McDonald’s is expected to experience only a modest profit from its $5 meal deal, with an estimated profit margin ranging between 1% and 5%, translating to a profit of $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski.
This affordable meal option is a strategy by McDonald’s to attract inflation-stricken consumers, encouraging them to visit the restaurant and potentially purchase additional items beyond the $5 meal.
However, the actual profitability of this deal is contingent on various factors, including the prices of ingredients, labor costs, and overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, emphasized that the $5 meal is “more promotional than profitable.” She also pointed out that if the offer successfully draws diners back in, franchise owners may not see a corresponding increase in profits.
Approximately 95% of McDonald’s restaurants are franchisee-operated, allowing these owners to set their own prices while managing extra expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, noted that franchisees aim to alleviate these overhead costs by providing promotions like the $5 meal deal.
Nonetheless, Spiegel remarked that this meal bundle primarily serves as a “loss leader” intended to attract and retain customers. She indicated that once additional costs, including labor, packaging, condiments, delivery fees, and marketing, are considered, franchise owners often see minimal to no profit from the items included in the deal.