McDonald’s may see a profit from its $5 meal deal, although it is expected to be modest. Restaurant analyst Mark Kalinowski estimates that the fast-food chain could achieve a profit margin of between 1% and 5%, translating to approximately $0.05 to $0.25 for each meal sold.
Kalinowski noted that the deal aims to attract price-conscious consumers dealing with inflation. However, its success also relies on various factors, including ingredient costs, labor expenses, and overhead.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.” Even if it draws customers back to the restaurant, the profits may not necessarily trickle down to franchise owners.
According to estimates, about 95% of McDonald’s locations are owned by franchisees, who set their own prices and manage costs like rent, insurance, permits, and taxes. In May, Joe Erlinger, president of McDonald’s U.S., indicated that franchisees often execute promotional strategies, such as the $5 meal deal, to deal with operational expenses.
However, Spiegel emphasized that the deal functions more as a “loss leader” meant to attract and retain customers. When considering overhead costs related to labor, packaging, condiments, delivery, and marketing, she stated that owners may effectively eliminate any potential profits from the deal.