McDonald’s is expected to make only a modest profit from its newly introduced $5 meal deal, with profit margins projected to fall between 1% and 5%. This translates to an estimated gain of approximately $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this promotional deal aims to attract cost-conscious consumers who have been impacted by inflation and encourages them to purchase additional items beyond the $5 offer.
However, profitability hinges on various factors including the costs of ingredients, labor, and operational expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the meal deal as “more promotional than profitable.”
Despite attracting customers back to the fast-food chain, franchise owners might not experience significant profits from this deal. Approximately 95% of McDonald’s locations are franchise-owned, meaning that individual owners set the prices and manage their own expenses such as rent, insurance, and taxes.
In a statement from May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often implement promotional offers like the $5 deal to help offset their overhead costs. However, Spiegel pointed out that once the additional expenses for labor, packaging, condiments, delivery, and marketing are considered, franchise owners might not see any profit from the meals included in the deal.