McDonald’s is expected to see a modest profit from its $5 meal deal, with margins estimated to range between 1% and 5%. This translates to about $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski notes that the deal is a strategy for McDonald’s to attract inflation-sensitive consumers, hoping that once customers are in the restaurant, they will make additional purchases beyond the $5 meal.
However, the profitability of this offering hinges on various factors, including the costs of ingredients, labor, and overhead. Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, describes the $5 meal deal as primarily promotional rather than significantly profitable.
Furthermore, even if the combo successfully draws customers back in, it does not guarantee that franchise owners will reap these profits. Approximately 95% of McDonald’s locations are franchisee-owned, which means that individual owners set their own prices and must manage various additional expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees attempt to lower their overhead costs by implementing promotional deals like the $5 meal. Nevertheless, Spiegel explains that the bundle serves primarily as a “loss leader” intended to attract and retain customers. Once labor, packaging, condiments, delivery costs, and marketing efforts are considered, she argues that franchise owners may effectively eliminate any profit on these promotional items.