McDonald’s is anticipated to generate a modest profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%, translating to earnings of about $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this promotional deal aims to attract consumers who are feeling the pinch of inflation, encouraging them to enter the restaurant and potentially make additional purchases beyond the $5 offer.
However, the ability to turn a profit is contingent on various factors, including ingredient costs, labor, and operational expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, emphasized that the $5 meal deal leans more towards being a promotional strategy rather than a moneymaker.
She also pointed out that even if the promotional offering successfully draws customers back into the restaurant, it may not guarantee that franchisees will benefit from those profits, as approximately 95% of McDonald’s locations are franchise-operated. Franchise owners have the autonomy to set their prices and manage additional expenses such as rent, insurance, permits, and taxes.
In a statement made in May, McDonald’s U.S. president Joe Erlinger noted that franchisees often seek to offset overhead costs by implementing promotional campaigns like the $5 meal deal. Nonetheless, Spiegel described the bundle primarily as a “loss leader,” aimed at attracting and re-engaging customers.
When factors such as labor, packaging, condiments, delivery fees, and marketing costs are taken into account, Spiegel indicated that franchise owners might ultimately negate any earnings from the meal deal.