McDonald’s is set to profit modestly from its $5 meal deal, though the profit margins are expected to be between 1% and 5%, translating to roughly $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this promotion is aimed at attracting inflation-weary consumers back to the restaurant, with the hope that they will make additional purchases beyond the $5 offering.
However, the profitability of this deal hinges on various factors including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, indicated that the $5 meal deal is “more promotional than profitable.”
Despite bringing customers into the restaurant, it doesn’t guarantee that franchisees will benefit financially. Approximately 95% of McDonald’s locations are franchisee-owned, meaning these owners set their own prices and manage additional expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, stated that franchisees implement promotional deals like the $5 meal to offset overhead costs. However, Spiegel remarked that the bundle functions more as a “loss leader to capture and re-capture guests.” After considering the extra costs related to labor, packaging, condiments, delivery, and marketing, owners often find that they eliminate any potential profits from the deal.