McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to approximately $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
This initiative is part of McDonald’s strategy to attract inflation-weary consumers back to their restaurants, with the hope that customers will purchase additional items beyond the $5 deal. However, the potential for profitability is influenced by various factors including ingredient costs, labor expenses, and overall overhead.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.” While the meal deal may drive foot traffic, franchisees may not see a corresponding increase in profits due to their autonomy over pricing and the burden of additional costs like rent, insurance, and taxes.
Approximately 95% of McDonald’s locations are franchise-owned, with franchisees utilizing promotions like the $5 meal to manage overhead costs. However, the promotional nature of the meal means that it acts more as a “loss leader” aimed at attracting and retaining customers. Once expenses related to labor, packaging, condiments, delivery, and marketing are considered, Spiegel indicated that franchise owners might eliminate any profits from the deal altogether.