McDonald’s may achieve a profit from its $5 meal deal, but the profit margins are expected to be modest. According to restaurant analyst Mark Kalinowski, the profit margin on this combo meal is projected to be between 1% and 5%, translating to approximately $0.05 to $0.25 for each meal sold.
Kalinowski pointed out that this deal is part of McDonald’s strategy to attract inflation-weary consumers back to their restaurants, with the hope that once they are there, they will purchase more items beyond the $5 deal.
However, profitability will hinge on various factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Though the promotion could bring customers back to the restaurants, it doesn’t guarantee profits for franchise owners. Approximately 95% of McDonald’s locations are franchisee-owned, meaning these owners must manage their own costs, such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often use promotional deals like the $5 meal to help manage their overhead costs. Nonetheless, Spiegel emphasized that the bundle mainly serves as a “loss leader to capture and re-capture guests.”
When additional expenses, including labor, packaging, condiments, delivery fees, and marketing are taken into account, she noted that franchise owners could effectively eliminate any profit from the items included in the deal.