McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%. This translates to approximately $0.05 to $0.25 in profit for each bundle sold, according to restaurant analyst Mark Kalinowski.
The initiative aims to attract customers who are feeling the effects of inflation, with the hope that once they enter the restaurant, they will purchase more than just the discounted meal. However, the actual profitability of the deal is influenced by various factors, including ingredient costs, labor expenses, and overhead.
Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.” She further explained that while the deal may bring customers into the restaurants, it does not guarantee that franchisees will see a profit.
As approximately 95% of McDonald’s locations are owned by franchisees, these owners have the flexibility to set their own prices and must manage additional costs such as rent, insurance, permits, and taxes. In a previous statement, McDonald’s U.S. president Joe Erlinger acknowledged that franchisees often run promotions like the $5 meal deal to offset their overhead.
Despite its intent to draw in customers, the bundle functions more as a “loss leader” to attract and retain diners. Once the costs associated with labor, packaging, condiments, delivery charges, and marketing are taken into account, franchise owners may find that any potential profit from the items included in the deal is substantially diminished.