McDonald’s may see a slight profit from its $5 meal deal, although it will be modest. According to restaurant analyst Mark Kalinowski, the fast-food chain’s profit margin on the combo is expected to be between 1% and 5%, translating to earnings of approximately $0.05 to $0.25 for each bundle sold.
Kalinowski mentioned that this deal is part of McDonald’s strategy to attract consumers who are feeling the effects of inflation, encouraging them to enter the restaurant and potentially purchase more than just the $5 meal.
However, the profitability of this deal is contingent on various factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, characterized the $5 meal offer as “more promotional than profitable.” She added that even if the combo draws customers back, franchisees might not benefit from those profits.
Around 95% of McDonald’s locations are franchised, meaning that individual owners determine their own pricing and must manage additional expenses like rent, insurance, permits, and taxes. In May, Joe Erlinger, president of McDonald’s U.S., stated that franchisees often run promotional deals like the $5 meal to offset their higher overhead costs.
Spiegel noted that the meal deal functions primarily as a “loss leader” aimed at attracting and retaining customers. Once additional expenses such as labor, packaging, condiments, delivery, and marketing are considered, she indicated that franchise owners may eliminate any profit margin on the items included in the deal.