McDonald’s is poised to generate a modest profit from its $5 meal deal, with expectations of profit margins ranging between 1% and 5%. This translates to approximately $0.05 to $0.25 earned on each bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski indicated that the promotional offer aims to attract customers who may be feeling the pinch of inflation, with the hope that once inside the restaurant, they will make additional purchases beyond the $5 meal.
However, the potential for profit hinges on various factors, including the 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 deal successfully brings diners back to McDonald’s, it does not guarantee that franchise owners will see any benefits. Approximately 95% of McDonald’s locations are franchisee-owned, meaning the franchisees set their own prices and manage additional expenses like rent, insurance, permits, and taxes.
In May, Joe Erlinger, the president of McDonald’s U.S., noted that franchisees often offer promotions like the $5 meal deal to help offset their overhead costs. Nevertheless, Spiegel asserted that the bundle serves primarily as a “loss leader” designed to attract and retain customers. After accounting for costs related to labor, packaging, condiments, delivery, and marketing, she pointed out that owners effectively eliminate any profit from the individual items in the offer.