McDonald’s is introducing a $5 meal deal that may generate a small profit, estimated to be between 1% and 5%, translating to roughly $0.05 to $0.25 for each sale, according to restaurant analyst Mark Kalinowski. This strategy aims to attract inflation-weary customers back to the restaurants, encouraging them to purchase additional items beyond the deal.
However, the actual profitability of this meal offering will be influenced by various factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.”
She noted that while the promotion may draw diners into McDonald’s locations, franchise owners might not see the benefits. Approximately 95% of McDonald’s locations are franchisee-operated, meaning that individual owners set their own pricing and must manage various costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees often use promotional deals like the $5 meal to offset overhead expenses. However, Spiegel pointed out that the offering functions primarily as a “loss leader” intended to attract and retain customers. She cautioned that when taking into account costs such as labor, packaging, condiments, delivery charges, and marketing, franchise owners may end up erasing any potential profit from the meal deal.