McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated to range from 1% to 5%, translating to about $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
This meal deal represents an effort by McDonald’s to attract price-sensitive consumers facing inflationary pressures, with the hope that once customers are inside the restaurant, they may purchase additional items beyond the $5 offer.
However, overall profitability hinges on various factors such as ingredient costs, labor, and general overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, suggests that the $5 meal deal is more of a promotional strategy than a significant revenue generator.
Spiegel noted that even if the meal deal successfully brings diners back to McDonald’s, it may not translate to profits for franchisees. Approximately 95% of McDonald’s locations are franchise-owned, meaning individual owners set their own prices and are responsible for covering operational costs like rent, insurance, permits, and taxes.
In a statement earlier this year, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often use promotional offers, such as the $5 meal deal, to manage operational expenses. However, Spiegel commented that the bundle is primarily a “loss leader,” aimed at attracting and retaining customer visits.
Once the costs associated with labor, packaging, condiments, delivery, and marketing are considered, she indicated that franchise owners may effectively eliminate any profit from the deal.