McDonald’s could see a slight profit from its $5 meal deal, but it is expected to be minimal. Industry analyst Mark Kalinowski estimates that the profit margin on the meal will range from 1% to 5%, translating to approximately $0.05 to $0.25 for each deal sold.
Kalinowski notes that this promotion is part of McDonald’s strategy to attract customers who are feeling the strain of inflation, with hopes that they will purchase additional items once inside the restaurant.
However, several factors like ingredient costs, labor expenses, and overhead will influence the profitability. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Moreover, while the meal deal may entice diners back to McDonald’s, franchise owners might not benefit financially. Approximately 95% of McDonald’s locations are franchisee-owned, meaning these owners set their own prices and face various costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S. operations, indicated that franchisees often utilize promotional offers like the $5 meal to manage overhead costs. Despite this strategy, Spiegel emphasized that the meal bundle acts more like a “loss leader” aimed at attracting customers. After accounting for labor, packaging, condiments, delivery fees, and marketing expenses, she noted that franchise owners often end up eliminating any profit from the deal.