McDonald’s is expected to generate a modest profit from its recently introduced $5 meal deal, with profit margins estimated to be between 1% and 5%, translating to about $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
This promotional strategy aims to attract consumers who are feeling the effects of inflation and encourage them to make additional purchases beyond the $5 offer.
However, the overall profitability of the deal will be influenced by various factors, such as the costs associated with ingredients, labor, and other overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, describes the $5 meal deal as “more promotional than profitable.”
While the meal deal may entice customers to visit the restaurant, it does not guarantee that franchise owners will share in any profits. Approximately 95% of McDonald’s locations are franchisee-owned, meaning that individual owners are responsible for their pricing and incur various costs, including rent, insurance, permits, and taxes.
In comments made in May, Joe Erlinger, president of McDonald’s U.S., noted that franchisees utilize promotional offers like the $5 meal deal to help mitigate their overhead costs. Nonetheless, Spiegel pointed out that the bundle often serves as a “loss leader” meant to attract and retain customers. Once expenses for labor, packaging, condiments, delivery, and marketing are considered, Spiegel indicated that franchise owners could end up eliminating any profit from the deal.