McDonald’s is looking to generate a modest profit from its new $5 meal deal, with profit margins predicted to be between 1% and 5%. According to restaurant analyst Mark Kalinowski, this translates to earnings of approximately $0.05 to $0.25 for each meal sold.
The fast food giant aims to attract budget-conscious consumers who are feeling the pinch of inflation, encouraging them to visit the restaurant and potentially purchase additional items beyond the $5 offer. However, the actual profitability of this deal hinges on various factors, including the costs associated with ingredients, labor, and general overhead.
Arlene Spiegel, president of Arlene Spiegel & Associates, emphasized that the $5 meal deal is more of a promotional strategy than a significant revenue generator. She noted that even if the pricing helps to bring customers back, franchise owners may not benefit financially, as around 95% of McDonald’s locations are franchise-owned, each with its own pricing strategy and financial responsibilities such as rent and insurance.
In May, Joe Erlinger, McDonald’s U.S. president, acknowledged that franchisees often implement promotional deals like the $5 meal to offset these overhead costs. Nonetheless, Spiegel remarked that considering additional expenses—such as labor, packaging, condiments, delivery charges, and marketing—franchise owners might end up eliminating any profit from the deals.