McDonald’s is anticipated to generate a modest profit from its $5 meal deal, with profit margins ranging from 1% to 5%. This translates to earnings of approximately $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the promotion is designed to attract inflation-burdened consumers back to the restaurant, with the expectation that once inside, they may purchase more items beyond the $5 offering.
However, profitability will hinge on several factors, including the costs of ingredients, labor, and overheads. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, remarked that the $5 meal deal is “more promotional than profitable.”
Even if the offer manages to draw diners, franchisees may not enjoy the profits. Approximately 95% of McDonald’s locations are franchise-owned, meaning those owners set their own prices and manage additional expenses like rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, indicated that franchisees aim to lessen overhead costs by implementing promotional deals like the $5 meal. However, Spiegel emphasized that the bundle acts more like a “loss leader to capture and re-capture guests.” When accounting for costs related to labor, packaging, condiments, delivery, and marketing, franchise owners often find that their potential profits from the meal deal are significantly diminished.