McDonald’s is expected to make a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to about $0.05 to $0.25 per meal sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this promotion is aimed at attracting customers who are grappling with inflation, hoping that once they enter the restaurant, they will spend more than just the $5 meal. However, profitability will heavily rely on factors such as 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.” While the deal could increase foot traffic, it does not guarantee that franchisees will benefit from those sales. Approximately 95% of McDonald’s locations are franchise-owned, meaning individual owners set their own prices and must manage various costs, including rent, insurance, permits, and taxes.
In a statement made in May, Joe Erlinger, president of McDonald’s U.S., indicated that franchisees use promotional deals like the $5 offering to help offset overhead costs. Nevertheless, Spiegel emphasized that this bundle acts more as a loss leader to attract customers. After accounting for additional expenses such as labor, packaging, condiments, delivery fees, and marketing, she pointed out that franchise owners may end up eliminating any profits from the deal altogether.