McDonald’s may see some profit from its $5 meal deal, but it is only expected to be modest. According to restaurant analyst Mark Kalinowski, the profit margin for the combo is anticipated to be between 1% and 5%, translating to approximately $0.05 to $0.25 for each meal sold.
Kalinowski highlighted that this initiative is part of McDonald’s strategy to draw back consumers who have been affected by inflation, with hopes that once customers visit, they will purchase more items beyond the $5 deal.
Profitability will also hinge on several factors, including ingredient costs, labor, and overhead expenditures. Arlene Spiegel, president of Arlene Spiegel & Associates, remarked that the deal is primarily more promotional than profitable.
Moreover, while the $5 meal could attract more patrons, it may not guarantee profits for franchisees, who own about 95% of McDonald’s outlets. Franchise owners set their own prices and must manage various expenses, such as rent, insurance, permits, and taxes.
In a statement earlier this year, McDonald’s U.S. president Joe Erlinger mentioned that franchise owners often use promotional offers like the $5 meal deal to help reduce overhead costs. However, Spiegel noted that this bundle acts more as a “loss leader” aimed at attracting customers. Once additional expenses such as labor, packaging, condiments, delivery fees, and marketing are considered, franchise owners may lose any potential profit from the items included in the meal deal.