McDonald’s is expected to generate a profit from its $5 meal deal, but it is likely to be a modest one. According to restaurant analyst Mark Kalinowski, the profit margin on the combo could range between 1% and 5%, translating to approximately $0.05 to $0.25 per bundle sold.
Kalinowski noted that the meal deal serves as an incentive for consumers feeling the pressures of inflation to return to the restaurant, with the possibility that they may purchase additional items while there. However, the actual profitability will hinge on various factors including ingredient costs, labor, and overall expenses.
Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She indicated that merely attracting customers back does not guarantee profits for franchise owners.
Since about 95% of McDonald’s locations are franchise-owned, individual franchisees set their own prices and are responsible for costs such as rent, insurance, permits, and taxes. In May, McDonald’s U.S. president Joe Erlinger stated that franchisees often use promotional offers like the $5 meal deal to help manage these overhead costs.
Nonetheless, Spiegel emphasized that the meal deal acts as a “loss leader,” aimed at bringing customers in and retaining them. When taking into account the additional costs for labor, packaging, condiments, delivery charges, and marketing, she concluded that franchise owners often eliminate any potential profit from the deal.