McDonald’s may generate a modest profit from its $5 meal deal, but the margins are expected to be low. Restaurant analyst Mark Kalinowski estimates the profit margin on the meal combo will range between 1% and 5%, translating to approximately $0.05 to $0.25 earned per bundle sold.
Kalinowski noted that this meal deal is a strategy for McDonald’s to attract inflation-weary customers back to its restaurants, with hopes that they will make additional purchases beyond the $5 offering.
However, profitability is contingent on several factors, including the fluctuating costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as being “more promotional than profitable.”
Furthermore, franchisees may not benefit from the profits generated by this offering. Approximately 95% of McDonald’s locations are franchise-owned, which means franchisees are responsible for their own pricing and must account for additional costs related to rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., stated that franchisees often implement promotional deals like the $5 meal in an attempt to manage their overhead costs. Nonetheless, Spiegel remarked that the meal bundle acts primarily as a “loss leader” aimed at attracting and retaining customers. After factoring in the costs of labor, packaging, condiments, delivery fees, and marketing, she indicated that franchise owners effectively eliminate any potential profit from this deal.