McDonald’s may be poised to generate a modest profit from its $5 meal deal, with predicted profit margins ranging from 1% to 5%. This translates to a profit of approximately $0.05 to $0.25 for each meal bundle sold, according to restaurant analyst Mark Kalinowski.
This meal deal is part of McDonald’s strategy to attract inflation-strained consumers back into its outlets, with the hope that once they enter, they will also make additional purchases beyond the $5 option.
However, the actual profitability of this deal hinges on several factors, including the costs related to ingredients, labor, and other overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as more of a promotional strategy than a profitable one.
Spiegel highlighted that even with increased customer traffic, franchise owners may not benefit from the expected profits. Approximately 95% of McDonald’s locations are franchise-owned, meaning that the franchisees set their own prices and are responsible for managing various additional costs, including rent, insurance, permits, and taxes.
Joe Erlinger, McDonald’s president for the U.S., mentioned in May that franchisees often deploy promotional offers like the $5 meal deal to help reduce these overhead costs. Nonetheless, Spiegel noted that the deal acts as a “loss leader” aimed at attracting and retaining customers.
When considering the extra expenses tied to labor, packaging, condiments, delivery, and marketing, she stated that franchise owners may effectively eliminate any potential profit from one or all items included in the meal bundle.