McDonald’s is expected to earn a modest profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%. This translates to a profit of approximately $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski.
The fast-food giant is introducing this deal as a strategy to attract consumers who are feeling the strain of inflation, hoping to encourage them to purchase additional items once they visit the restaurant.
However, profitability will depend on several factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.”
Furthermore, while the meal deal may help bring diners back, it doesn’t guarantee profits for franchisees. Approximately 95% of McDonald’s locations are franchisee-owned, allowing individual owners to set their own prices and manage their expenses, which include rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often run promotions like the $5 meal deal to help offset overhead costs. Nonetheless, Spiegel characterized the deal as a “loss leader” aimed at attracting and retaining customers. When considering additional costs such as labor, packaging, condiments, delivery fees, and marketing, she explained that franchise owners essentially eliminate profits from any of the items in the deal.