McDonald’s is expected to see a slim profit margin from its $5 meal deal, estimated between 1% and 5%, translating to roughly $0.05 to $0.25 in profit for each combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this meal deal is one of McDonald’s strategies to attract inflation-weary consumers back into the restaurant, with the hope that they will purchase additional items beyond the $5 offering.
Profitability will hinge on various factors such as ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal as “more promotional than profitable.”
She added that even if the meal deal successfully draws customers back, franchisees may not benefit significantly from the generated sales. Approximately 95% of McDonald’s locations are franchise-owned, meaning franchisees set their own prices and absorb added expenses like rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often use promotions like the $5 meal to counteract ongoing overhead costs. However, Spiegel emphasized that the meal deal functions as a “loss leader” intended to attract and retain guests.
Once franchise owners factor in the costs of labor, packaging, condiments, delivery fees, and marketing, they may essentially eliminate any potential profit from the items included in the deal.