McDonald’s is poised to earn a modest profit from its $5 meal deal, with a projected profit margin of between 1% and 5%, equivalent to approximately $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski.
The meal deal is part of McDonald’s strategy to attract inflation-weary consumers back to its locations, with the hope that once they enter, they will purchase more than just the $5 offering.
However, the chain’s profitability hinges on several factors, such as the fluctuating costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Even if the promotion succeeds in drawing diners back, franchise owners may not see a corresponding increase in profits. With approximately 95% of McDonald’s locations being franchisee-owned, these owners set their own pricing and must manage various added costs including rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, noted that franchisees often run promotional offers like the $5 meal to help offset their overhead. Nevertheless, Spiegel emphasized that the deal serves primarily as a “loss leader” aimed at attracting and retaining customers.
Once factoring in additional expenses related to labor, packaging, condiments, delivery, and marketing, owners often find that they eliminate any potential profit on the items included in the deal.