McDonald’s is set to generate a small profit from its $5 meal deal, but the margins will be tight. According to restaurant analyst Mark Kalinowski, the fast food giant is expected to see a profit margin ranging from 1% to 5%, translating to approximately $0.05 to $0.25 earned for each meal sold.
Kalinowski explained that this promotional offer aims to attract consumers who are burdened by inflation, enticing them to purchase additional items beyond the $5 deal once they enter the restaurant.
However, the profitability of the meal deal will largely depend on variable factors such as ingredient costs, labor expenses, and overheads. Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She pointed out that even if the deal successfully draws customers back, it does not guarantee profits for franchisees.
Currently, about 95% of McDonald’s locations are franchise-owned, meaning that individual owners set their prices and must contend with expenses like rent, insurance, permits, and taxes. In a statement from May, Joe Erlinger, the president of McDonald’s U.S., mentioned that franchisees offer deals like the $5 meal to alleviate overhead costs.
Spiegel noted that while the meal deal may serve as a “loss leader” to attract patrons, when expenses related to labor, packaging, condiments, delivery, and marketing are taken into account, franchise owners may find that the deal effectively eradicates potential profits.