McDonald’s is expected to generate a modest profit from its newly introduced $5 meal deal, with estimated profit margins ranging from 1% to 5%, translating to approximately $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski indicated that this deal is part of McDonald’s strategy to attract consumers grappling with inflation, hoping that while they visit for the $5 offering, they will purchase additional items.
However, the profit potential will rely on several factors, including the costs of ingredients, labor, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Despite the initiative potentially drawing diners back to the restaurant, franchise owners may not see those profits due to their responsibility for various expenses such as rent, insurance, permits, and taxes. About 95% of McDonald’s locations are franchised, meaning owners set their prices independently.
In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees often implement promotional deals, like the $5 meal, to manage their overhead costs. Nonetheless, Spiegel noted that the bundle serves primarily as a “loss leader” to draw in and retain customers. Once various additional expenses, including labor, packaging, condiments, delivery, and marketing, are factored in, she stated that franchise owners typically eliminate any potential profit from the deal.