McDonald’s is expected to earn a modest profit from its $5 meal deal, with profit margins projected to range from 1% to 5%. This translates to an approximate profit of $0.05 to $0.25 for each meal sold, as noted by restaurant analyst Mark Kalinowski.
According to Kalinowski, this initiative is part of McDonald’s strategy to attract consumers who are feeling the pinch of inflation, and the company hopes that once customers are inside, they will be tempted to make additional purchases beyond the $5 offering.
However, the potential for profit hinges on various factors, including ingredient costs, labor expenses, and other overheads. Arlene Spiegel, president of Arlene Spiegel & Associates, pointed out that the $5 meal deal is more focused on promotion than generating profit.
Furthermore, even if this deal succeeds in drawing diners back to the restaurant, it does not guarantee that franchise owners will benefit financially. Approximately 95% of McDonald’s locations are franchisee-operated, meaning these owners set their own prices and must manage additional expenses such as rent, insurance, and taxes.
In a recent statement, McDonald’s U.S. President Joe Erlinger mentioned that franchisees often leverage promotional offers like the $5 meal deal to offset their operating costs. Yet, as Spiegel indicated, this deal may serve primarily as a “loss leader” aimed at attracting and retaining customers. After accounting for labor, packaging, condiments, delivery charges, and marketing expenses, she concluded that franchise owners could effectively eliminate any potential profit from the deal.