McDonald’s is expected to see a modest profit from its $5 meal deal, with profit margins projected to fall between 1% and 5%. This translates to approximately $0.05 to $0.25 earned for each meal sold, according to restaurant analyst Mark Kalinowski.
The fast food chain aims to attract inflation-weary customers back to its restaurants, hoping that diners will make additional purchases beyond the $5 meal. However, the profitability of this deal will be influenced by factors such as ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.” While it may draw customers, franchise owners may not reap the benefits of increased sales. Notably, about 95% of McDonald’s locations are franchisee-owned, meaning that franchisees set their own prices and are responsible for various costs including rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S. operations, mentioned that franchisees often launch promotional offers like the $5 meal to help offset their overhead costs. However, Spiegel characterized this promotion as primarily a “loss leader,” intended to attract and retain customers. She added that when considering additional expenses such as labor, packaging, condiments, delivery fees, and marketing, many franchise owners may end up eliminating any profit from the meal deal.