McDonald’s is expected to generate a modest profit from its $5 meal deal, estimating a profit margin between 1% and 5%, which translates to approximately $0.05 to $0.25 per meal sold, according to restaurant analyst Mark Kalinowski.
This promotional offer aims to attract consumers who are feeling the effects of inflation, with the hope that they will purchase additional items once inside the restaurant. However, the profitability of this meal deal will depend on various factors, including the costs of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, noted that while the $5 meal deal is designed to draw customers back into McDonald’s, it is considered “more promotional than profitable.”
The situation is complicated for franchise owners, who operate about 95% of McDonald’s locations. These owners have the autonomy to set their own prices but must also manage rising costs, such as rent, insurance, permits, and taxes. In May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often use promotional offers to offset these overhead expenses.
Spiegel added that the meal deal serves as a “loss leader” to attract customers, but when accounting for the added costs of labor, packaging, condiments, delivery, and marketing, franchise owners typically end up eliminating any potential profits from the deal.