McDonald’s may generate some profit from its $5 meal deal, although the expected margin will be modest. According to restaurant analyst Mark Kalinowski, the profit margin for this combo meal is projected to be between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski explained that this deal is part of McDonald’s strategy to attract budget-conscious consumers facing inflation, with the hope that once customers enter the restaurant, they may purchase more than just the $5 meal.
However, the profitability of this meal deal hinges on various factors, including the costs of ingredients, labor, and overall overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.”
Even if the combo meal successfully draws diners back to McDonald’s locations, franchise owners may not necessarily benefit from the profits. Approximately 95% of McDonald’s locations are franchisee owned, meaning that these owners set their own prices and must manage extra costs like rent, insurance, permits, and taxes.
In May, Joe Erlinger, the president of McDonald’s U.S. operations, indicated that franchisees often attempt to offset overhead costs by offering promotional deals, such as the $5 meal. Nevertheless, Spiegel characterized the meal bundle as more of a “loss leader” aimed at attracting and retaining customers. Once all additional costs, including labor, packaging, condiments, delivery charges, and marketing, are taken into account, franchise owners effectively eliminate any potential profit from the deal.