McDonald’s may earn a modest profit from its $5 meal deal, though the profit margin is expected to be relatively low. According to restaurant analyst Mark Kalinowski, the profit margin on the combo is projected to be between 1% and 5%, which translates to approximately $0.05 to $0.25 for each meal sold.
Kalinowski noted that the meal deal is a strategic effort by McDonald’s to entice inflation-strained consumers back into their restaurants. The goal is to encourage customers to purchase more items beyond just the $5 offering once they are inside.
However, the profitability of the meal deal will heavily rely on various factors, including ingredient costs, labor, and other overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.”
Even if the deal successfully brings customers into the restaurant, it does not guarantee that franchisees will benefit from increased profits. About 95% of McDonald’s locations are franchisee-owned, and these owners set their own prices while also shouldering extra costs like rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees frequently attempt to manage their overhead costs by offering promotions like the $5 meal deal. However, Spiegel emphasized that the bundle often serves as a “loss leader” designed to attract and retain customers. She explained that once labor, packaging, condiments, delivery fees, and marketing costs are considered, franchise owners can effectively eliminate profits on the items included in the deal.