McDonald’s is expected to achieve only a modest profit margin from its $5 meal deal, estimated between 1% and 5%, translating to approximately $0.05 to $0.25 earned for each bundle sold, according to restaurant analyst Mark Kalinowski.
This promotional offer aims to attract consumers who are feeling the pinch of inflation, with the hope that once they are in the restaurant, they will purchase more than just the $5 meal.
However, the actual profitability of the deal hinges on various factors including the costs of ingredients, labor, and overall operational expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, emphasized that the $5 meal deal is “more promotional than profitable.”
She also pointed out that even if the promotion draws diners back, it does not guarantee profits for franchisees, who make up roughly 95% of McDonald’s locations. These owners set their own prices and bear additional expenses such as rent, insurance, permits, and taxes.
In a statement from May, Joe Erlinger, McDonald’s U.S. president, indicated that franchisees often use promotional offers like the $5 deal to offset their overhead costs. Spiegel noted that despite its benefits in attracting customers, the bundle serves more as a “loss leader” strategy aimed at gaining and retaining clientele. Once the costs of labor, packaging, condiments, delivery, and marketing are taken into account, she concluded that franchise owners often eliminate their profit margins entirely.