McDonald’s may derive a profit from its $5 meal deal, although it will be relatively small. According to restaurant analyst Mark Kalinowski, the profit margin for this combination meal is anticipated to range from 1% to 5%, translating to approximately $0.05 to $0.25 for each meal sold.
Kalinowski noted that this offering is a strategy McDonald’s is using to attract cost-conscious consumers amid rising inflation, with the intention of encouraging them to purchase additional items beyond the $5 meal.
However, achieving profitability will hinge on several factors, including the expenses related to ingredients, labor, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, emphasized that the $5 meal deal is “more promotional than profitable.”
Even if this deal successfully draws customers back into the restaurants, franchisees may not experience the benefits directly, Spiegel pointed out. Approximately 95% of McDonald’s locations are franchise-owned, which means individual owners control their pricing and bear various costs, such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S. operations, mentioned that franchisees often attempt to offset these overheads by offering promotions like the $5 meal deal. Nonetheless, Spiegel described the bundle as a “loss leader” aimed at attracting and retaining customers.
She further explained that when additional costs related to labor, packaging, condiments, delivery, and marketing are taken into account, franchise owners essentially eliminate any potential profit from the promotional deal.