McDonald’s is expected to generate a modest profit from its $5 meal deal, with anticipated profit margins between 1% and 5%, translating to around $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
This offering aims to attract inflation-weary consumers back to the restaurant, hoping that once they are inside, they will make additional purchases beyond the $5 meal. However, actual profitability will be influenced by factors such as ingredient costs, labor, and overhead expenses.
Consulting firm president Arlene Spiegel described the $5 meal deal as “more promotional than profitable.” Even if the deal successfully draws customers, franchisees may not benefit from the added revenue, as approximately 95% of McDonald’s locations are franchise-owned, which entails owners setting their own prices and covering various expenses like rent, insurance, and taxes.
In May, McDonald’s U.S. president Joe Erlinger outlined how franchisees attempt to manage overhead costs by launching promotional deals like the $5 meal. Despite this, Spiegel noted that the package serves more as a “loss leader” aimed at gaining and re-gaining customers.
Once costs related to labor, packaging, condiments, delivery, and marketing are considered, she indicated that franchise owners could end up eliminating any potential profits from this deal.