McDonald’s is expected to see a modest profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%. According to restaurant analyst Mark Kalinowski, this amounts to approximately $0.05 to $0.25 gained for each bundle sold.
The fast food giant aims to attract inflation-weary customers with this deal, intending to encourage them to purchase additional items once they are in the restaurant. However, the ability to turn a profit hinges on various factors, including the costs of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.” She added that even if the offer brings diners back, it may not result in significant profits for franchise owners, who own about 95% of McDonald’s locations. These franchisees set their own prices and must manage their own costs, such as rent, insurance, permits, and taxes.
Joe Erlinger, president of McDonald’s U.S., mentioned in May that franchise owners often use promotions like the $5 meal deal to offset overhead costs. Yet, Spiegel labeled this offering a “loss leader” meant to attract and retain customers. After accounting for expenses related to labor, packaging, condiments, delivery, and marketing, she indicated that owners may erase any potential profit from the deal.