McDonald’s is set to see a modest profit from its new $5 meal deal, with expected profit margins ranging from 1% to 5%. This translates to earnings of approximately $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski explained that the meal deal is a strategy to attract inflation-burdened consumers back to the restaurant, with the hope that they will purchase additional items beyond the $5 offer.
However, the actual profitability of this deal will hinge on various factors, including ingredient prices, labor costs, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Even if the deal succeeds in bringing customers into the restaurant, franchise owners may not see substantial profits. Approximately 95% of McDonald’s locations are franchisee-owned, meaning that these owners establish their own pricing and must manage additional expenses such as rent, insurance, permits, and taxes.
Joe Erlinger, McDonald’s U.S. president, noted that franchisees often introduce promotional offers like the $5 meal deal to help offset these overhead costs. Nonetheless, Spiegel pointed out that this deal acts more as a “loss leader” aimed at attracting and retaining customers. She also indicated that once additional costs such as labor, packaging, condiments, delivery charges, and marketing are considered, franchise owners may effectively eliminate any profit from the items included in the deal.