McDonald’s is expected to generate a modest profit from its $5 meal deal, with estimates suggesting a profit margin of between 1% and 5%. This translates to earnings of approximately $0.05 to $0.25 per meal sold, according to restaurant analyst Mark Kalinowski.
The fast-food giant is using this deal as a strategy to attract inflation-weary customers, with hopes that once they enter the restaurant, they will purchase more than just the $5 meal.
However, profitability will be influenced by various factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is more about promotional efforts than generating significant profit.
It’s important to note that around 95% of McDonald’s locations are franchise-owned, meaning individual owners set their own prices and are responsible for managing additional expenses like rent, taxes, and permits.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often use promotional deals like the $5 meal to help offset overhead costs. However, Spiegel pointed out that the bundle primarily serves as a “loss leader” aimed at attracting customers rather than ensuring substantial profitability for the franchisees. Once factors such as labor, packaging, condiments, delivery, and marketing costs are included, many franchise owners may find that their profits from the deal are minimal or nonexistent.