McDonald’s is anticipated to profit modestly from its $5 meal deal, with profit margins expected to be between 1% and 5%. This translates to earnings of approximately $0.05 to $0.25 for each meal bundle sold, as reported by restaurant analyst Mark Kalinowski.
Kalinowski suggests that the deal is a strategy for McDonald’s to attract cost-conscious consumers, encouraging them not only to purchase the $5 meal but also to buy additional items during their visit.
The profitability of this offer will be influenced by various factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Even with the effort to draw in diners, Spiegel pointed out that franchise owners may not necessarily benefit from the profits. Approximately 95% of McDonald’s locations are franchise-operated, meaning owners set their own pricing while managing costs such as rent, insurance, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., stated that franchisees often implement promotional offers like the $5 deal to offset overhead costs. However, Spiegel emphasized that the meal bundle acts more as a “loss leader” aimed at attracting and retaining customers.
Once costs for labor, packaging, condiments, delivery, and marketing are accounted for, she indicated that franchise owners may effectively eliminate any potential profit from the items included in the deal.