McDonald’s could potentially earn a modest profit from its $5 meal deal, with profit margins estimated to range between 1% and 5%. This translates to approximately $0.05 to $0.25 per meal sold, according to restaurant analyst Mark Kalinowski.
Kalinowski suggested that this deal is part of McDonald’s strategy to attract customers who are feeling the effects of inflation, encouraging them not only to purchase the $5 meal but also to spend more on additional items once they are inside the restaurant.
However, the likelihood of generating profit depends on various factors, including the costs of ingredients, labor, and other overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, noted that the $5 meal deal is more of a promotional strategy than a profit-generating one.
She pointed out that while the meal deal might bring customers back to McDonald’s, it does not guarantee that franchisees, who own about 95% of McDonald’s locations, will see increased profits. Franchise owners set their own prices and are responsible for covering additional expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, the president of McDonald’s U.S., mentioned that franchisees often offer promotions like the $5 meal deal to help offset overhead costs. Nevertheless, Spiegel emphasized that the deal should be viewed as a “loss leader” intended to attract and retain customers. After considering various costs, including labor, packaging, condiments, delivery, and marketing, she remarked that franchise owners often end up eliminating any profit from the items included in the meal deal.