McDonald’s is expected to generate a profit from its $5 meal deal, but the earnings will be modest. According to restaurant analyst Mark Kalinowski, the profit margin on the combo is projected to range from 1% to 5%, translating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski noted that this meal offering is part of McDonald’s strategy to attract inflation-weary consumers back to their restaurants, with the hope that once customers are inside, they will purchase additional items beyond just the $5 meal.
However, the ability to turn a profit will rely on various factors, including the costs of ingredients, labor, and other overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Even if the combo successfully brings diners back, franchise owners may not necessarily benefit from these profits, as about 95% of McDonald’s locations are franchise-owned. This structure means that franchisees establish their own pricing and face additional expenses such as rent, insurance, permits, and taxes.
In a statement from May, Joe Erlinger, the U.S. president of McDonald’s, indicated that franchisees often aim to offset overhead costs through promotional offers like the $5 meal deal. Nonetheless, Spiegel explained that this bundle often acts as a “loss leader” intended to attract and retain customers. Once variables like labor costs, packaging, condiments, delivery fees, and marketing expenses are considered, franchise owners may find that they eliminate any profit margins on the items included in the deal.