McDonald’s is expected to see a modest profit from its $5 meal deal, with profit margins projected to be between 1% and 5%. This translates to approximately $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski.
The meal deal aims to attract consumers who are feeling the effects of inflation and encourage them to make additional purchases while they are in-store. However, profitability will hinge on various factors, including the costs of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal offering is more of a promotional strategy than a profit-generating one. She emphasized that while the deal might draw customers back to the fast-food chain, franchise owners, who make up about 95% of McDonald’s locations, may not necessarily benefit from the profits. Franchise owners establish their own pricing and bear expenses related to rent, insurance, permits, and taxes.
In May, McDonald’s U.S. president Joe Erlinger indicated that franchisees often implement promotional deals, like the $5 meal, to offset their overhead costs. Nevertheless, Spiegel remarked that the meal bundle serves primarily as a “loss leader” to attract customers and regain their patronage. When taking into consideration the extra costs associated with labor, packaging, condiments, delivery, and marketing, franchise owners often find that their profit margins on these promotions are negligible.