McDonald’s is likely to see a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to approximately $0.05 to $0.25 earned for each bundle sold, according to restaurant analyst Mark Kalinowski.
The fast-food giant aims to attract consumers who are feeling the effects of inflation with this offer, hoping that once customers are in the store, they will purchase additional items beyond the $5 deal.
However, turning a profit hinges on various factors, including the cost of ingredients, labor, and other overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, labeled the meal deal as “more promotional than profitable.”
Despite the potential to draw diners back to restaurants, franchisees may not necessarily benefit from the increased traffic. With about 95% of McDonald’s outlets being franchise-owned, individual owners set their own prices and incur various costs, including rent, insurance, permits, and taxes.
In May, Joe Erlinger, President of McDonald’s U.S., mentioned that franchisees often run promotional offers like the $5 meal to offset overhead costs. However, Spiegel noted that this bundle can act more as a “loss leader” aimed at attracting and retaining customers rather than generating significant profit. According to her, once the additional costs of labor, packaging, condiments, delivery fees, and marketing are included, franchise owners may ultimately eliminate any profit from the items in the deal.