McDonald’s is expected to see modest profits from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to about $0.05 to $0.25 per meal sold, according to restaurant analyst Mark Kalinowski.
This pricing strategy is part of McDonald’s efforts to attract consumers who are feeling the strains of inflation, hoping that once customers are drawn in by the deal, they will purchase additional items. However, the actual profitability of the deal hinges on various factors including ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.” She noted that while the deal may draw diners back to the restaurant, it does not guarantee that franchisees will benefit from increased profits.
Approximately 95% of McDonald’s locations are franchise-owned, meaning these owners set their own prices and bear additional costs such as rent, insurance, permits, and taxes. In May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often use promotional offers like the $5 meal deal to help offset these overhead costs.
Nevertheless, Spiegel remarked that the deal functions more as a “loss leader” aimed at attracting and retaining customers. Once expenses for labor, packaging, condiments, delivery, and marketing are accounted for, she indicated that franchise owners might eliminate any profit margins from the meal combination offered.