McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%. This translates to earnings of approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the promotion aims to attract consumers who are weary of inflation, encouraging them to visit McDonald’s more frequently and potentially purchase additional items beyond the $5 meal.
However, the overall profitability of the deal hinges on several factors, including the costs associated with ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, indicated that the $5 meal deal is “more promotional than profitable.”
While the combo may draw diners back into the restaurant, it does not guarantee that franchisees will benefit from increased profits. With approximately 95% of McDonald’s locations operated by franchisees, these owners set their own prices and are responsible for managing additional expenses such as rent, insurance, permits, and taxes.
In a statement from May, McDonald’s U.S. president Joe Erlinger highlighted that franchisees often introduce promotional offerings, like the $5 meal deal, as a strategy to offset overhead costs.
Nonetheless, Spiegel pointed out that the meal bundle acts more as a “loss leader” intended to attract and retain customers. She explained that when factoring in the costs of labor, packaging, condiments, delivery, and marketing, franchise owners often find that any potential profits from the deal are effectively eliminated.