McDonald’s is poised to earn a modest profit from its $5 meal deal, with projections estimating a profit margin between 1% and 5%. This translates to earnings of approximately $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski.
Kalinowski explained that the promotion aims to attract consumers who are feeling the pressure of inflation, hoping to get them through the door so they might purchase additional items beyond the $5 deal.
However, profitability hinges on various factors, including the cost of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
While the offer may drive customers back to the restaurant, franchise owners may not see a significant increase in profits. About 95% of McDonald’s locations are franchise-owned, meaning these owners set their own prices and deal with extra costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., indicated that franchisees often use promotional deals, like the $5 meal, to offset those overhead costs. Nevertheless, Spiegel remarked that the bundle serves primarily as a “loss leader,” intended to attract and retain customers.
When considering additional expenses for labor, packaging, condiments, delivery, and marketing, she noted that franchise owners typically end up eliminating any potential profit from the deal.