McDonald’s is expected to achieve a modest profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%, translating to roughly $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
This meal deal is part of McDonald’s strategy to attract consumers who are feeling the impact of inflation and encourage them to make additional purchases while at the restaurant. However, the viability of turning a profit hinges on several factors, including ingredient costs, labor expenses, and overhead.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.” Additionally, even if the offer draws customers into the store, franchise owners may not see those profits directly, as approximately 95% of McDonald’s locations are franchise-operated. This means that franchisees set their own prices and bear the burden of various costs, such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, the U.S. president of McDonald’s, mentioned that franchisees utilize promotional deals like the $5 meal to manage overhead costs. However, Spiegel described the bundle as more of a “loss leader” intended to attract and retain customers. Once the extra expenses associated with labor, packaging, condiments, delivery, and marketing are considered, she indicated that franchise owners could ultimately eliminate any potential profits from the deal.