McDonald’s is expected to see modest profits from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to approximately $0.05 to $0.25 for each sold combo, according to restaurant analyst Mark Kalinowski. The fast-food chain aims to attract consumers who are feeling the pinch of inflation, hoping that once customers are inside the restaurant, they will purchase more than just the discounted meal.
However, the profitability of this deal hinges on several factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” Even if this offering brings customers back to McDonald’s, franchise owners may not benefit financially.
With around 95% of McDonald’s locations being franchise-owned, individual owners set their own prices and bear the burden of additional costs such as rent, insurance, permits, and taxes. Joe Erlinger, president of McDonald’s U.S., mentioned in May that franchisees often run promotional offers like the $5 meal deal to reduce these overhead costs.
Despite this, Spiegel referred to the bundle as a “loss leader” intended to attract and retain customers. She pointed out that when considering extra costs related to labor, packaging, condiments, delivery, and marketing, franchise owners often end up eliminating any potential profit from the deal.