McDonald’s is anticipated to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% to 5%, equating to approximately $0.05 to $0.25 per meal sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the purpose of the deal is to attract consumers who are feeling the impact of inflation, with the hope that once customers enter the establishment, they will purchase more than just the $5 meal.
However, the actual profitability of the deal will hinge on several variables, including ingredient costs, labor expenses, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, described the meal deal as “more promotional than profitable.”
Moreover, even if the $5 combo draws customers back into the restaurants, it does not guarantee profits for franchise owners, as roughly 95% of McDonald’s locations are franchisee-operated. These franchisees set their own pricing and are responsible for costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often introduce promotional offers like the $5 meal deal to manage these overhead costs. Nevertheless, Spiegel indicated that the bundle primarily serves as a “loss leader aimed at attracting and retaining guests.”
Once the additional expenses related to labor, packaging, condiments, delivery, and marketing are taken into account, Spiegel asserted that franchise owners could eliminate any potential profit from the items included in the deal.