McDonald’s is expected to generate a modest profit from its $5 meal deal, with estimated profit margins ranging from 1% to 5%, translating to approximately $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
This new offering is part of McDonald’s strategy to attract inflation-weary customers back into its outlets, with the expectation that once inside, they might purchase additional items beyond the $5 deal.
However, the actual profitability of the meal deal is influenced by several factors, including ingredient costs, labor, and overhead expenses. Industry consultant Arlene Spiegel indicated that the $5 deal is “more promotional than profitable.”
She noted that even if the deal successfully drives customers to restaurants, franchise owners, who make up about 95% of McDonald’s locations, might not see significant profits. Franchisees have the autonomy to set their own prices and must manage several expenses like rent, insurance, permits, and taxes.
In a statement made in May, McDonald’s U.S. president Joe Erlinger highlighted that franchisees often employ promotional strategies to counteract high overhead costs, including the introduction of the $5 meal deal.
Despite efforts to attract customers, Spiegel pointed out that the deal is primarily a “loss leader” meant to draw in guests. She explained that when additional expenses related to labor, packaging, condiments, delivery, and marketing are taken into account, franchise owners could effectively lose any profit from the items included in the deal.