McDonald’s is expected to see only a modest profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%. According to restaurant analyst Mark Kalinowski, this translates to earning approximately $0.05 to $0.25 for each meal sold.
Kalinowski noted that the meal deal is part of McDonald’s strategy to attract inflation-weary consumers back to the restaurant. The hope is that once customers enter, they will be encouraged to purchase more than just the $5 offer.
However, profitability will be influenced by various factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the deal as “more promotional than profitable.” She warned that even if the meal deal succeeds in drawing diners, franchise owners may not experience a significant financial benefit.
Approximately 95% of McDonald’s locations are franchise-owned, which means that franchisees determine their own pricing and must manage additional costs such as rent, insurance, permits, and taxes. In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees often use promotional offers like the $5 meal deal to alleviate these overhead costs.
Spiegel explained that while the meal deal aims to attract and retain customers, the increased costs associated with labor, packaging, condiments, delivery, and marketing can effectively eliminate any profits from the items included in the deal.