McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski indicated that this meal deal is part of McDonald’s strategy to attract inflation-weary consumers back to its restaurants, with the intention of encouraging them to purchase more items beyond the $5 offering. However, profitability will be influenced by various factors, including the costs of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She noted that even if the deal draws customers into the restaurants, it doesn’t guarantee that franchisees will reap those profits, as roughly 95% of McDonald’s locations are franchise-owned. Franchise owners determine their own prices and are responsible for covering additional expenses, such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, the U.S. president of McDonald’s, mentioned that franchisees often use promotional offers like the $5 meal deal to help manage their overhead costs. Nevertheless, Spiegel views the meal bundle primarily as a “loss leader,” aimed at attracting and retaining customers. She pointed out that once costs associated with labor, packaging, condiments, delivery, and marketing are considered, franchise owners may significantly diminish or entirely eliminate any profit from the deal.