McDonald’s may experience a modest profit margin from its $5 meal deal, estimated between 1% and 5%. According to restaurant analyst Mark Kalinowski, this translates to roughly $0.05 to $0.25 of profit for each meal bundle sold. The introduction of this deal is part of McDonald’s strategy to attract inflation-weary consumers back to its restaurants, with hopes that they will purchase more items beyond the budget-friendly offering.
However, the actual profitability will hinge on several factors including the prices of ingredients, labor costs, and other overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as being “more promotional than profitable.” While the deal may draw customers into the restaurants, it does not guarantee profits for franchise owners, who own about 95% of McDonald’s locations.
Franchisees independently set their prices and need to manage various additional expenses such as rent, insurance, permits, and taxes. Joe Erlinger, McDonald’s U.S. president, noted that franchisees often run promotional offers like the $5 meal deal to help offset their overhead costs. However, Spiegel cautioned that once costs related to labor, packaging, condiments, delivery, and marketing are considered, franchise owners may effectively eliminate any profit from each item in the deal.