McDonald’s is poised to generate a modest profit from its new $5 meal deal, but the profit margins are expected to be minimal. According to restaurant analyst Mark Kalinowski, the fast-food giant is likely to see profit margins on this offering ranging from 1% to 5%, translating to approximately $0.05 to $0.25 for each meal sold.
Kalinowski noted that this deal aims to attract inflation-burdened consumers back into McDonald’s locations, with the hope that they will purchase more than just the $5 meal. However, overall profitability will hinge on various factors, including ingredient costs, labor expenses, and operational overhead.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She emphasized that even if the meal deal successfully brings customers back, franchise owners may not see those profits. With about 95% of McDonald’s locations being franchise-operated, individual owners have the autonomy to set prices but also bear additional expenses such as rent, insurance, permits, and taxes.
In a statement made in May, Joe Erlinger, president of McDonald’s U.S., acknowledged that franchisees often run promotional offers like the $5 meal deal to offset overhead costs. However, Spiegel pointed out that the deal functions as a “loss leader” aimed at attracting and retaining customers. When considering labor, packaging, condiments, delivery fees, and marketing expenses, franchise owners often find that the promotional bundle eliminates any potential profit from the items included in the deal.