McDonald’s is expected to generate a profit from its $5 meal deal, although it will be on the modest side. According to restaurant analyst Mark Kalinowski, the profit margin for this combo meal is anticipated to be between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski noted that the meal deal is part of McDonald’s strategy to attract consumers who are feeling the pinch of inflation, with the hope that once customers are in the restaurant, they will be encouraged to purchase additional items beyond the $5 offering.
The actual profitability of the meal deal hinges on factors such as ingredient costs, labor expenses, and overhead costs. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable,” indicating that its primary function is to draw customers in rather than significantly boost profits.
Despite the potential to attract diners, it might not lead to substantial profits for franchise owners. Approximately 95% of McDonald’s locations are franchisee operated, which means individual owners determine their pricing and bear the burden of additional expenses like rent and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, noted that franchisees often run promotional offers like the $5 meal deal to help reduce overhead costs. However, Spiegel emphasized that this deal serves more as a “loss leader” aimed at bringing in and retaining customers. Once the costs associated with labor, packaging, condiments, and marketing are accounted for, she indicated that franchise owners may end up eliminating any profit related to the items in the deal.