McDonald’s is anticipated to generate a modest profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%, equating to approximately $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this promotional offer aims to attract consumers who are feeling the effects of inflation, encouraging them to visit the restaurant and potentially make additional purchases beyond the $5 deal.
However, the potential for profitability hinges on several variables, including the costs of ingredients, labor, and overhead expenses. As Arlene Spiegel, president of Arlene Spiegel & Associates, pointed out, the $5 meal deal is primarily a promotional strategy rather than a significant profit generator.
Even if the meal deal draws customers back into McDonald’s locations, franchise owners may not benefit from the profits. Spiegel explained that around 95% of McDonald’s restaurants are franchise-owned, meaning individual owners control their pricing and manage expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., remarked that franchisees often implement promotional offers like the $5 deal to offset overhead costs. Nonetheless, Spiegel emphasized that this offer acts more as a “loss leader” to attract and retain customers. When accounting for additional costs like labor, packaging, condiments, delivery, and marketing, she indicated that franchisees often eliminate any potential profit from the items included in the deal.