McDonald’s is expected to generate a modest profit from its new $5 meal deal, with profit margins estimated to be between 1% and 5%. This translates to an earnings range of $0.05 to $0.25 per meal sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the meal deal is aimed at attracting consumers who may be feeling the effects of inflation. The goal is to entice them to enter the restaurant and encourage them to purchase more items beyond just the $5 offering.
However, the overall profitability of this deal hinges on several variables, 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.”
While the discounted meal may draw customers back to the restaurants, it does not guarantee that franchise owners will reap the financial benefits. Approximately 95% of McDonald’s locations are franchisee owned, which allows individual owners to set their own pricing while also managing their unique costs, including rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees often try to offset these overhead costs through promotional offers like the $5 meal. Spiegel emphasized that the deal acts more like a “loss leader” intended to attract and retain customers. She pointed out that after accounting for various costs—such as labor, packaging, condiments, delivery, and marketing—franchise owners often eliminate any profit from the meal deal.