McDonald’s is expected to turn a modest profit from its $5 meal deal, with profit margins likely ranging from 1% to 5%. This translates to about $0.05 to $0.25 earned for each meal bundle sold, as noted by restaurant analyst Mark Kalinowski.
The fast food giant aims to attract customers feeling the sting of inflation and hopes that once they enter the restaurant, they will purchase additional items. However, the profitability of the meal deal relies on various factors, including ingredient costs, labor expenses, and overhead.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” Even if the deal successfully brings diners back, franchise owners may not see significant profits due to the fact that approximately 95% of McDonald’s locations are franchise-owned, meaning franchisees set their own prices and manage various additional costs such as rent, insurance, permits, and taxes.
In a statement made in May, McDonald’s U.S. president Joe Erlinger acknowledged that franchisees often run promotions like the $5 meal deal to offset their overhead costs. Spiegel emphasized that the meal bundle functions more as a “loss leader to capture and re-capture guests,” suggesting that expenses related to labor, packaging, condiments, delivery, and marketing can significantly diminish any potential profit from the deal for franchise owners.