McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins anticipated to be between 1% and 5%, translating to approximately $0.05 to $0.25 for each combination sold, according to restaurant analyst Mark Kalinowski.
This promotional strategy aims to entice budget-conscious consumers back into the restaurant, encouraging them to make additional purchases beyond the $5 meal. However, the potential for profit is influenced by several factors, including ingredient costs, labor, and operational expenses.
Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, described the $5 deal as “more promotional than profitable.” She noted that while the meal deal may draw customers, it does not guarantee that franchisees will benefit from increased profits.
Approximately 95% of McDonald’s locations are franchise-owned, where individual owners establish their own pricing and manage various expenses such as rent, insurance, permits, and taxes. In a statement made in May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often use promotional offers like the $5 meal deal to offset their overhead costs.
Despite these efforts, Spiegel emphasized that the deal essentially serves as a “loss leader to capture and re-capture guests.” After accounting for expenses related to labor, packaging, condiments, delivery fees, and marketing, she indicated that franchisees often find it challenging to maintain profitability from this offering.