McDonald’s may generate a modest profit from its $5 meal deal, with projections indicating a profit margin ranging from 1% to 5%. This translates to an estimated profit of $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
The promotion is part of McDonald’s strategy to attract inflation-sensitive customers back to its restaurants, with the hope that once customers are inside, they will purchase additional items beyond the $5 deal.
However, the profitability of the meal deal is contingent upon various factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.”
Although the combo might help bring diners back, it does not guarantee that franchisees will benefit from the profits. Approximately 95% of McDonald’s locations are franchise-owned, which means franchisees set their own prices and manage additional expenses such as rent, insurance, permits, and taxes.
Joe Erlinger, McDonald’s U.S. president, indicated in May that franchisees use promotional offers like the $5 meal deal to help reduce overhead costs. Despite this tactic, Spiegel described the bundle primarily as a “loss leader” aimed at attracting customers. After considering extra costs associated with labor, packaging, condiments, delivery, and marketing, she stated that franchise owners could effectively eliminate profits on the items included in the deal.