McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this initiative aims to attract inflation-weary customers back to the restaurant, with the hope that once inside, they will purchase additional items beyond the $5 meal. However, the actual profitability of the deal will be influenced by various factors, including ingredient costs, labor expenses, and overhead.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” Even if the offering successfully draws diners back to McDonald’s, franchisees may not necessarily benefit from the profits, as about 95% of McDonald’s locations are franchise-owned. This means that franchise owners set their own prices and bear additional costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees typically try to offset these overhead costs through promotional offers like the $5 meal deal. However, Spiegel emphasized that the bundle serves primarily as a “loss leader” to attract customers. Once they factor in costs related to labor, packaging, condiments, delivery, and marketing, franchise owners may find that any potential profit from the promotion is effectively eliminated.