McDonald’s may see a small profit from its $5 meal deal, as the anticipated profit margin is between 1% and 5%. This translates to approximately $0.05 to $0.25 earned for each meal bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this promotion aims to attract customers who are feeling the effects of inflation, with the hope that they will purchase additional items beyond just the meal deal.
However, overall profitability will be influenced by factors such as ingredient costs, labor expenses, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, remarked that the $5 meal deal is “more promotional than profitable.”
She cautioned that while the deal could entice customers back to the restaurant, it might not equate to profits for franchisees, who own about 95% of McDonald’s locations. These franchisees are responsible for setting their own prices and managing various expenses like rent, insurance, permits, and taxes.
In a statement made in May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often utilize promotional offerings, like the $5 meal, to help offset their overhead costs. Nonetheless, Spiegel classified the meal deal as a “loss leader” intended to draw in customers. Considering the additional costs involved, including labor, packaging, condiments, delivery fees, and marketing, she emphasized that franchise owners often do not profit from selling these promotional items.