McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%, equating to about $0.05 to $0.25 per meal sold, according to restaurant analyst Mark Kalinowski.
This promotional offering is part of McDonald’s strategy to attract consumers facing inflationary pressures, encouraging them to enter the restaurant and purchase additional items. However, the overall profitability of the deal will be influenced by several factors, including the costs of ingredients, labor, and operational expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She emphasized that while this deal may draw customers back into the restaurant, franchise owners may not benefit significantly from the limited profits, as approximately 95% of McDonald’s locations are franchise-owned. This means that individual owners are responsible for setting their own prices and covering various additional costs, such as rent, insurance, permits, and taxes.
In light of rising overhead costs, McDonald’s U.S. president Joe Erlinger noted in May that franchisees often implement promotional offers like the $5 meal deal to help manage expenses. However, Spiegel pointed out that after considering the costs of labor, packaging, condiments, delivery fees, and marketing, franchise owners may find that the deal ultimately erases any potential profit from the items included.