McDonald’s is anticipating a modest profit from its $5 meal deal, with margins expected to be between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold, as noted by restaurant analyst Mark Kalinowski.
This promotional offering is aimed at attracting consumers who are feeling the pinch of inflation, encouraging them to dine in and potentially purchase additional items beyond the $5 deal.
However, the profitability of the meal deal is contingent on various factors, including the prices of ingredients, labor costs, and other operational expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She mentioned that while it may bring customers back into McDonald’s restaurants, it does not guarantee profits for franchise owners.
With about 95% of McDonald’s locations being franchise-owned, these operators are responsible for setting prices and managing expenses such as rent, insurance, permits, and taxes.
In a previous statement, McDonald’s U.S. president Joe Erlinger indicated that franchisees aim to offset these overheads through promotional offers like the $5 meal deal. Nonetheless, Spiegel emphasized that the bundle serves more as a “loss leader to capture and re-capture guests.”
When considering the added costs of labor, packaging, condiments, delivery, and marketing, she pointed out that owners often find themselves eliminating any potential profits from the items included in the deal.