McDonald’s is expected to see a modest profit from its new $5 meal deal, with margins estimated between 1% and 5%. This translates to earnings of approximately $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski.
This promotional offer aims to attract consumers struggling with inflation back to the restaurant, encouraging them to purchase additional items beyond the $5 meal. However, the profitability of the deal hinges on varying factors such as ingredient costs, labor, and overall expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, pointed out that the $5 meal is more about promotion than profit. Even if the deal draws customers in, franchise owners may not see corresponding profits due to the 95% of McDonald’s locations being franchisee-owned. These owners are responsible for setting their own prices and managing costs associated with rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., noted that franchisees often implement promotional strategies like the $5 meal deal to manage overhead costs. Nevertheless, Spiegel remarked that the promotion acts as a “loss leader” intended to attract and retain customers. When accounting for additional expenses such as labor, packaging, condiments, delivery fees, and marketing, franchise owners could find that these costs negate any potential profit from the meal offers.