McDonald’s is projected to earn a modest profit from its $5 meal deal, with expected profit margins ranging from 1% to 5%. This translates to 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 inflation-weary consumers back to its restaurants, hoping that once customers arrive, they will be inclined to purchase additional items beyond the $5 offer.
However, profitability hinges on several factors, including the costs associated with ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.”
Moreover, even if the deal successfully draws customers, it may not guarantee profits for franchise owners. Approximately 95% of McDonald’s locations are franchisee-owned, meaning owners determine their own pricing and must manage various additional costs like rent, insurance, permits, and taxes.
In a statement from May, McDonald’s U.S. president Joe Erlinger acknowledged that franchisees often attempt to reduce overhead by offering promotions like the $5 meal deal. Nonetheless, Spiegel emphasized that the meal is essentially a “loss leader” aimed at attracting and retaining customers. Once expenses for labor, packaging, condiments, delivery, and marketing are accounted for, owners often find that any potential profit from the deal is eliminated.