McDonald’s is expected to earn a modest profit from its $5 meal deal, with profit margins anticipated to range between 1% and 5%. This translates to approximately $0.05 to $0.25 for each bundle sold, as noted by restaurant analyst Mark Kalinowski.
The meal deal is part of McDonald’s strategy to entice cost-conscious consumers back into their restaurants. The goal is to encourage customers to purchase additional items beyond the $5 offer.
However, the potential for profit hinges on several factors, including the costs of ingredients, labor, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as being more about promotion than profitability.
Despite attracting diners with the combo, it does not guarantee that franchise owners will see additional profits. Approximately 95% of McDonald’s locations are franchise-operated, meaning owners have control over pricing and must manage increased expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., indicated that franchisees utilize promotional deals like the $5 meal to offset their overhead costs. However, Spiegel pointed out that the deal often serves as a “loss leader” to draw in customers rather than to generate significant profits.
When considering the other costs involved, including labor, packaging, condiments, delivery, and marketing, Spiegel remarked that owners may ultimately eliminate any profit margin on the items included in the deal.