McDonald’s appears poised to make a modest profit from its $5 meal deal, with profit margins expected to be between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold, as reported by restaurant analyst Mark Kalinowski.
This initiative is part of McDonald’s strategy to attract consumers feeling the pressure of inflation, encouraging them to visit more often and potentially purchase additional items beyond the discounted offering.
However, achieving profitability is contingent upon various factors, including ingredient costs, labor expenses, and overhead costs. Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.”
While the deal may encourage customers to return to the restaurant, Spiegel noted that franchisees may not benefit from the profits due to their responsibility for setting prices and managing expenses like rent, insurance, and taxes.
In a statement in May, Joe Erlinger, McDonald’s U.S. president, indicated that franchisees often use promotional offers, including the $5 meal deal, to offset these overhead costs. Nevertheless, Spiegel contended that the bundle serves primarily as a “loss leader” to attract and retain customers. Once factors such as labor, packaging, condiments, delivery fees, and marketing costs are taken into account, she suggested that franchise owners may find that any potential profits from the deal are essentially eliminated.