McDonald’s is anticipated to achieve modest profits from its $5 meal deal, with profit margins expected to range between 1% and 5%, translating to approximately $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski.
This offering is part of McDonald’s strategy to attract cost-conscious consumers back to its locations. The company hopes that once customers engage with the $5 deal, they will be encouraged to purchase additional items.
However, turning a profit will hinge on various factors, including ingredient costs, labor expenses, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal serves more as a promotional tool rather than a significant revenue generator.
Spiegel emphasized that even if this combo successfully brings diners into the restaurants, it doesn’t guarantee profits for franchisees. Currently, about 95% of McDonald’s outlets are franchise-owned, meaning individual owners set their prices and manage their own operating costs, which include rent, insurance, permits, and taxes.
In comments made by Joe Erlinger, president of McDonald’s U.S., he mentioned that franchisees often implement promotional offers like the $5 meal deal to offset their overhead expenses. Nevertheless, Spiegel described the meal bundle more as a “loss leader” designed to attract and retain customers.
When other costs associated with labor, packaging, condiments, delivery, and marketing are considered, owners may find that they essentially eliminate any profit from this offering, according to Spiegel.