McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%. This translates to approximately $0.05 to $0.25 earned for each meal sold, as noted by restaurant analyst Mark Kalinowski.
The promotional offer is part of McDonald’s strategy to attract budget-conscious consumers who are grappling with inflation. The goal is to encourage them to purchase additional items beyond the $5 meal once they are inside the restaurant.
However, the profitability of this deal will vary based on various factors, including ingredient costs, labor, and overhead expenses. According to Arlene Spiegel, president of Arlene Spiegel & Associates, the $5 meal deal is considered more promotional than profitable.
It is important to note that around 95% of McDonald’s locations are franchisee-owned, meaning franchisees control their own pricing and must absorb rising costs like rent, insurance, permits, and taxes. McDonald’s U.S. president Joe Erlinger previously mentioned that franchisees often implement promotional strategies to offset these expenses.
Spiegel emphasized that despite attracting customers, the meal bundle likely serves as a “loss leader” intended to draw patrons back into the restaurants. Once costs for labor, packaging, condiments, delivery, and marketing are included, franchise owners may find that their potential profits from the deal are significantly reduced.