McDonald’s may see a small profit from its $5 meal deal, but the margins are expected to be quite limited. According to restaurant analyst Mark Kalinowski, the fast food chain could achieve a profit margin ranging from 1% to 5%, equating to earnings between $0.05 and $0.25 per combo sold.
This meal deal is part of McDonald’s strategy to attract consumers who are feeling the impact of inflation and encourage them to purchase more items beyond this offer. However, the profitability of the deal will hinge on various factors, including ingredient costs, labor, and other overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She noted that even if the deal brings customers back, franchise owners may not share in the profits due to the operational costs they bear. Since about 95% of McDonald’s locations are franchise-operated, owners must set their own prices while managing expenses like rent, insurance, permits, and taxes.
In May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often use promotional offerings like the $5 meal deal to help offset these overheads. Nonetheless, Spiegel pointed out that when other costs, including labor, packaging, condiments, delivery, and marketing, are accounted for, many franchisees may find their profits significantly diminished or wiped out altogether.