McDonald’s is expected to see only a modest profit from its new $5 meal deal, with profit margins anticipated to range from 1% to 5%. This translates to roughly $0.05 to $0.25 earned for each meal bundle sold, as per restaurant analyst Mark Kalinowski.
The fast food giant is implementing this offer as a strategy to attract budget-conscious consumers who are feeling the effects of inflation. The aim is not only to bring customers through the door but to encourage them to purchase additional items beyond the $5 meal.
However, profitability will be influenced by several factors including the costs of ingredients, labor, and overall operational expenses. According to Arlene Spiegel, president of Arlene Spiegel & Associates, the $5 deal is more of a promotional offer than a significant profit generator.
She pointed out that nearly 95% of McDonald’s outlets are franchise-owned, meaning individual owners set their own prices while also managing higher costs such as rent, insurance, permits, and taxes.
In May, McDonald’s U.S. president Joe Erlinger acknowledged that franchisees often utilize promotional marketing strategies like the $5 meal deal to help reduce these overhead costs. Nevertheless, Spiegel emphasized that the package acts more as a “loss leader,” intended primarily to attract customers, rather than as a means to generate substantial profit.
Once the extra expenses from labor, packaging, condiments, delivery, and marketing are considered, franchise owners may find that their profits from the deal are essentially negated.