McDonald’s could make a modest profit from its $5 meal deal.
The fast-food chain is likely to see a profit margin of 1% to 5% on the combo, equating to $0.05 to $0.25 for every bundle sold, according to restaurant analyst Mark Kalinowski. The deal is intended to attract inflation-weary consumers and encourage them to buy more than just the $5 meal.
Profitability will depend on several factors, including the cost of ingredients, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, noted that the $5 meal deal is more promotional than profitable. While it might bring diners back into the restaurant, franchisees may not see significant profits.
Around 95% of McDonald’s locations are franchise-owned, meaning owners set their own prices and must cover additional costs like rent, insurance, permits, and taxes. In May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees attempt to mitigate overhead costs through promotional offers such as the $5 meal deal.
Despite such efforts, the bundle is considered a “loss leader” to attract and retain customers. Factoring in the additional costs of labor, packaging, condiments, delivery charges, and marketing, owners might find that the deal essentially eliminates any profit on the items included in it.