McDonald’s is expected to see a modest profit from its $5 meal deal, with profit margins projected between 1% and 5%, translating to approximately $0.05 to $0.25 per meal combo, according to restaurant analyst Mark Kalinowski.
This deal is part of McDonald’s strategy to attract consumers who are grappling with inflation, aiming to encourage them to make additional purchases beyond just the $5 offering.
However, the actual profitability will hinge on various factors including ingredient costs, labor expenses, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Despite generating foot traffic in the restaurants, it may not ensure profits for franchise owners. Approximately 95% of McDonald’s locations are franchise-operated, meaning these owners set their own prices and manage extra costs like rent, insurance, permits, and taxes.
In May, U.S. President of McDonald’s Joe Erlinger noted that franchisees often use promotional deals like the $5 meal to help manage these overhead expenses. Nevertheless, Spiegel mentioned that the deal primarily serves as a “loss leader” to draw in customers.
She added that when considering the extra costs for labor, packaging, condiments, delivery, and marketing, franchise owners could significantly diminish or completely eliminate any profits from the meal deal.