McDonald’s is expected to earn a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to approximately $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
This meal deal is part of McDonald’s strategy to attract consumers who are feeling the pinch of inflation. The company hopes that once customers come in for the deal, they will be encouraged to purchase additional items.
However, the profitability of the $5 meal deal will hinge on various factors including ingredient costs, labor, and other overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the meal deal as “more promotional than profitable.”
Even if the meal deal successfully draws customers into the restaurant, it may not guarantee profits for franchise owners. Approximately 95% of McDonald’s locations are franchisee-operated, meaning that these owners establish their own pricing and must manage extra costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S. operations, noted that franchisees often launch promotional initiatives like the $5 meal deal to help manage their overhead costs. Nevertheless, Spiegel characterized this deal as a “loss leader,” designed to attract and retain customers.
When additional expenses tied to labor, packaging, condiments, delivery, and marketing are considered, she remarked that franchise owners may effectively eliminate any profit from the items included in the deal.