McDonald’s is set to introduce a $5 meal deal that is expected to yield only a modest profit margin, ranging from 1% to 5%. This equates to about $0.05 to $0.25 per meal bundle, according to restaurant analyst Mark Kalinowski.
The fast-food giant aims to attract inflation-burdened consumers back into its restaurants with this offer, hoping that once customers are inside, they will purchase additional items beyond the $5 deal.
However, profitability will depend on several factors, including ingredient costs, labor, and overall overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal is primarily a promotional strategy rather than a profitable one.
Furthermore, the majority of McDonald’s locations, approximately 95%, are franchise-owned. This means that franchisees set their own prices and must cover additional expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, explained that franchisees often utilize promotional deals like the $5 meal to help offset their overhead costs. Nonetheless, Spiegel asserted that this bundle serves as a “loss leader” aimed at attracting and retaining customers. When taking into account labor, packaging, condiments, delivery fees, and marketing costs, owners may find any potential profit from the meal deal effectively eliminated.