McDonald’s is expected to experience only a modest profit from its $5 meal deal, with profit margins projected to range between 1% and 5%, translating to approximately $0.05 to $0.25 for each meal bundle sold, according to restaurant analyst Mark Kalinowski.
This promotion is part of McDonald’s strategy to attract inflation-weary consumers back to its restaurants, with the hopes that once customers are inside, they will be encouraged to purchase additional items beyond the $5 meal.
The potential for profit will hinge on several factors including ingredient costs, labor expenses, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is more focused on promotion than profitability.
Despite efforts to draw diners in, franchise owners may not see significant profits from the deal. Approximately 95% of McDonald’s restaurants are franchise-operated, meaning individual owners determine their own pricing and must manage various additional costs such as rent, insurance, and taxes.
In a previous statement, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often implement promotional offers like the $5 meal deal to offset rising overhead costs. Nevertheless, according to Spiegel, this bundle often acts as a “loss leader” aimed at attracting and retaining customers. When taking into account expenses related to labor, packaging, condiments, delivery, and marketing, she indicated that franchise owners may end up eliminating any profit from the items included in the deal.