McDonald’s has introduced a $5 meal deal that is expected to generate only a modest profit margin, estimated to be between 1% and 5%. According to restaurant analyst Mark Kalinowski, this translates to a profit of approximately $0.05 to $0.25 for each meal sold.
The fast food chain aims to attract inflation-weary consumers with this offering, hoping that their visit will lead to increased sales of other items. However, profitability is contingent on several factors, including the costs of ingredients, labor, and other overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as more promotional than profitable. While it may successfully draw customers back into the restaurant, franchise owners may not necessarily benefit financially. With around 95% of McDonald’s locations being franchise-owned, individual owners set their own prices and must manage additional expenses like rent, insurance, permits, and taxes.
In a statement from May, McDonald’s U.S. president Joe Erlinger noted that franchisees often use promotional offers, such as the $5 meal deal, to help offset their overhead costs. Nevertheless, Spiegel warned that this bundle serves primarily as a “loss leader” aimed at attracting and retaining customers. After accounting for labor, packaging, condiments, delivery fees, and marketing costs, franchise owners often find that any potential profit from the deal is largely diminished.