McDonald’s is expected to generate a modest profit from its $5 meal deal, with estimates indicating a profit margin ranging from 1% to 5%. This translates to approximately $0.05 to $0.25 per meal sold, according to restaurant analyst Mark Kalinowski.
Kalinowski notes that the meal deal is part of McDonald’s strategy to attract customers who are feeling the pinch of inflation. The hope is that once customers enter the restaurant, they will purchase more than just the $5 combo.
However, profitability will rely on several variables, including the costs of ingredients, labor, and other operational expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, emphasizes that the $5 meal deal is more a promotional tool than a genuine profit generator.
Spiegel points out that while the combo may boost customer traffic, it doesn’t guarantee profits for franchise owners. Approximately 95% of McDonald’s locations are franchise-owned, meaning that these owners set their own prices and face their own business costs, including rent, insurance, permits, and taxes.
In May, Joe Erlinger, the U.S. president of McDonald’s, mentioned that franchisees often use promotions, like the $5 meal deal, to help manage their overhead expenses. Nonetheless, Spiegel cautions that this bundle acts more as a “loss leader” aimed at attracting and retaining customers. Once additional costs such as labor, packaging, condiments, delivery charges, and marketing are taken into account, franchise owners could end up with minimal or no profits from the deal.