McDonald’s is expected to generate only a modest profit from its $5 meal deal, with profit margins projected to be between 1% and 5%. This equates to earnings of approximately $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the deal is part of McDonald’s strategy to attract budget-conscious consumers who are weary from inflation. The aim is to entice customers to enter the restaurant and potentially purchase additional items beyond the $5 meal.
However, profitability will be influenced by various factors, including the costs associated with ingredients, labor, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal as “more promotional than profitable.”
Spiegel emphasized that franchise owners, who account for about 95% of McDonald’s locations, set their own prices and must manage additional expenses such as rent, insurance, permits, and taxes. In a previous statement, McDonald’s U.S. president Joe Erlinger indicated that franchisees seek to reduce these overhead costs through promotional offers like the $5 meal deal.
Despite its potential to draw customers, Spiegel argued that the meal deal serves mainly as a “loss leader” to bring in guests. Once the costs of labor, packaging, condiments, delivery, and marketing are considered, she stated that franchise owners often end up without a profit on the bundled offer.