McDonald’s anticipates modest profits from its new $5 meal deal, with profit margins expected to fall between 1% and 5%. This translates to approximately $0.05 to $0.25 earned for each meal bundle sold, according to restaurant analyst Mark Kalinowski.
The fast-food giant is introducing this offer to attract consumers who are feeling the financial pressure of inflation, hoping that once customers are in the restaurant, they will purchase additional items beyond the $5 deal.
However, the potential for profitability hinges on various factors, including the costs associated with ingredients, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Moreover, even though the offer could drive traffic into restaurants, franchisees may not benefit significantly from these sales. Approximately 95% of McDonald’s locations are franchise-owned, meaning owners set their own prices and manage expenses like rent, insurance, permits, and taxes.
In a previous statement, McDonald’s U.S. president Joe Erlinger noted that franchisees attempt to alleviate overhead by introducing promotional deals like the $5 meal. However, Spiegel referred to the meal as a “loss leader aimed at capturing and re-capturing guests.” She explained that when additional costs such as labor, packaging, condiments, delivery fees, and marketing are considered, franchise owners may eliminate virtually all profit generated from the deal.