McDonald’s is expected to generate a modest profit from its recently introduced $5 meal deal, with profit 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.
The fast-food giant is introducing this deal as a strategy to entice inflation-weary consumers back into its restaurants, with the hope that once customers are inside, they will purchase additional items beyond the $5 meal.
However, the actual profitability of this offering will rely on several factors, including ingredient costs, labor expenses, and other operational overheads. Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the meal deal as “more promotional than profitable.”
Moreover, it is important to note that approximately 95% of McDonald’s locations are franchisee-owned, meaning that franchisees have the autonomy to set their own prices and manage additional expenses such as rent, insurance, permits, and taxes.
In a statement from May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often attempt to offset these overhead costs by implementing promotional deals, including the $5 meal bundle.
Spiegel further noted that while the meal deal may attract diners, it functions primarily as a “loss leader” aimed at drawing in and retaining customers. After accounting for various costs—including labor, packaging, condiments, delivery fees, and marketing—franchise owners may ultimately eliminate any profit from the bundle, regardless of its items.