McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins projected between 1% and 5%. This translates to earnings of about $0.05 to $0.25 for each meal sold, as stated by restaurant analyst Mark Kalinowski.
Kalinowski indicated that the meal deal is an effort to attract inflation-weary customers back to McDonald’s. The strategy aims to encourage these customers to purchase more items once they are in the restaurant. However, profitability will hinge on various factors, including ingredient costs, labor expenses, and overhead.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” While it may entice diners to return, it doesn’t guarantee profits for franchisees. Approximately 95% of McDonald’s locations are franchise-operated, meaning individual owners determine their pricing and are responsible for additional expenses such as rent, insurance, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchise owners often implement promotional deals like the $5 meal to offset their overhead expenses. Nevertheless, analysts like Spiegel have pointed out that this bundle serves primarily as a “loss leader” aimed at attracting and retaining customers. Once factoring in the various costs related to labor, packaging, condiments, delivery, and marketing, franchise owners are likely to eliminate any potential profit from the meal deal.