McDonald’s is expected to achieve only a modest profit margin from its $5 meal deal, estimated to be between 1% and 5%. According to restaurant analyst Mark Kalinowski, this translates to approximately $0.05 to $0.25 for each meal bundle sold.
This initiative is part of McDonald’s strategy to attract consumers who are feeling the pinch from inflation, with the aim of encouraging them to purchase additional items beyond the featured offering.
However, the potential for profitability is contingent on several factors, including the costs of ingredients, labor, and other overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
It’s important to note that about 95% of McDonald’s locations are franchise-owned. This means that franchisees determine their own pricing and are responsible for covering additional costs such as rent, insurance, permits, and taxes. In May, Joe Erlinger, president of McDonald’s U.S. operations, indicated that franchisees often use promotional deals like the $5 meal to help manage their overhead expenses.
Nonetheless, Spiegel emphasized that the bundle primarily serves as a “loss leader” aimed at attracting customers. After accounting for various costs, including labor, packaging, condiments, delivery fees, and marketing, she noted that franchise owners effectively eliminate any potential profit from the items included in the deal.