McDonald’s is likely to see a slim profit from its $5 meal deal, with margins expected to range between 1% and 5%. This translates to a profit of approximately $0.05 to $0.25 for each meal sold, as noted by restaurant analyst Mark Kalinowski.
The fast-food giant is utilizing this deal as a strategy to attract consumers who are feeling the strain of inflation, hoping that once customers enter the restaurant, they might purchase additional items beyond the $5 offering.
However, the profitability of this meal deal will hinge on several factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, commented that the $5 meal deal is “more promotional than profitable.”
She emphasized that even if the deal brings diners back, franchisees may not see substantial profits. With about 95% of McDonald’s locations being franchise-owned, individual owners set their prices and manage their expenses, which include rent, insurance, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often try to offset overhead costs by implementing promotional offers like this one. Nevertheless, Spiegel pointed out that the bundle functions primarily as a “loss leader” aimed at attracting and retaining customers. When considering the extra costs associated with labor, packaging, condiments, delivery, and marketing, she indicated that owners may lose most or all potential profit from the meals offered in the deal.