McDonald’s is expected to generate a modest profit from its new $5 meal deal, with anticipated profit margins ranging between 1% and 5%. This translates to approximately $0.05 to $0.25 earned for each bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the initiative is part of McDonald’s strategy to attract inflation-weary customers back into their restaurants, with the hope that once inside, they will purchase more than just the $5 meal.
However, profitability will hinge on several factors, including ingredient costs, labor, and general overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.”
Moreover, even if the meal deal successfully draws in customers, franchise owners may not benefit significantly from the profits. With approximately 95% of McDonald’s locations being franchise-owned, individual operators set their own prices and cover various expenses including rent, insurance, permits, and taxes.
In a statement from May, McDonald’s U.S. president Joe Erlinger indicated that franchisees often implement promotional offers, like the $5 meal deal, to help manage their overhead costs. However, Spiegel emphasized that the meal deal often acts as a “loss leader aimed at capturing and recapturing customers.” After accounting for expenses related to labor, packaging, condiments, delivery, and marketing, franchise owners may effectively negate any potential profits from the items included in the deal.