McDonald’s is set to generate a modest profit from its $5 meal deal, with expected profit margins ranging between 1% and 5%. According to restaurant analyst Mark Kalinowski, this equates to a profit of $0.05 to $0.25 for each meal bundle sold. Kalinowski notes that the promotion aims to attract budget-conscious consumers and encourage them to purchase additional items once inside the restaurant.
Achieving profitability hinges on various factors such as the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, describes the $5 meal deal as being “more promotional than profitable.” She points out that while the deal may draw customers back to the restaurants, it doesn’t guarantee that franchise owners will see increased profits.
Approximately 95% of McDonald’s locations are franchise-owned, meaning individual owners set their own prices and handle numerous additional costs, including rent, insurance, permits, and taxes. In May, Joe Erlinger, president of McDonald’s U.S., stated that franchisees often employ promotional offers like the $5 meal deal to offset these overhead expenses. However, Spiegel emphasizes that the offer functions more as a “loss leader” to attract customers. After accounting for costs associated with labor, packaging, condiments, delivery, and marketing, she suggests that many franchise owners may end up erasing any potential profits from the deal.