McDonald’s is expected to make a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, equating to approximately $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
This promotional strategy aims to attract cost-conscious consumers amid rising inflation. Kalinowski noted that while the deal may bring customers into the restaurants, the expectation is that they will also purchase additional items.
However, the profitability of the deal hinges on various factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, emphasized that the $5 meal deal is “more promotional than profitable.”
Although the meal offering could help draw diners back, it may not necessarily benefit franchise owners. Approximately 95% of McDonald’s locations are franchisee-owned, meaning that franchisees set their own prices and deal with additional expenses like rent, insurance, permits, and taxes.
In a previous statement, Joe Erlinger, president of McDonald’s U.S., indicated that franchisees often use promotional offers, such as the $5 meal deal, to manage overhead costs. Nevertheless, Spiegel described the deal as more of a “loss leader” aimed at attracting and retaining customers. Once labor, packaging, condiments, delivery fees, and marketing costs are accounted for, franchise owners may find it difficult to achieve significant profits from the offer.