McDonald’s is expected to see a modest profit from its $5 meal deal, with profit margins projected between 1% and 5%. This equates to approximately $0.05 to $0.25 earned on each combo sold, according to restaurant analyst Mark Kalinowski.
This deal is part of McDonald’s strategy to attract consumers who are facing inflation, encouraging them to come in for the value offer and potentially purchase additional items while they are there. However, profitability will largely depend on fluctuating costs related to ingredients, labor, and overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, indicated that the $5 meal is more promotional than profitable. She noted that even if the deal drives foot traffic, the profits may not necessarily benefit franchise owners due to their individual pricing strategies and various costs such as rent, insurance, permits, and taxes.
Approximately 95% of McDonald’s locations are franchise-owned, meaning franchisees must carefully manage their own expenses. In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees utilize promotional offers like the $5 meal to help offset these overhead costs. However, Spiegel described the bundle as more of a “loss leader” designed to draw customers back. When accounting for costs related to labor, packaging, condiments, delivery, and marketing, franchise owners often see little to no profit from the items included in the deal.