McDonald’s may see a modest profit from its $5 meal deal, with profit margins expected to be between 1% and 5%, amounting to approximately $0.05 to $0.25 per combo sold, according to restaurant analyst Mark Kalinowski.
This meal deal is part of McDonald’s strategy to attract inflation-weary consumers back to its outlets, with hopes that customers will purchase additional items beyond the $5 offering.
However, profitability will hinge on various factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Additionally, she noted that while the deal may encourage more dining traffic, franchise owners may not necessarily benefit from increased profits. About 95% of McDonald’s locations are franchisee-owned, meaning these owners set their own prices and are responsible for managing added costs like rent, insurance, permits, and taxes.
In a statement made in May, McDonald’s U.S. president Joe Erlinger acknowledged that franchisees are employing promotional offers, including the $5 deal, to help offset their overhead expenses. However, Spiegel emphasized that the deal serves primarily as a “loss leader to capture and re-capture guests.” After accounting for labor, packaging, condiments, delivery charges, and marketing expenses, she indicated that franchisees often erase any potential profit from the items in the deal.