McDonald’s is projected to generate only a modest profit from its $5 meal deal, with estimated profit margins ranging between 1% and 5%. This translates to approximately $0.05 to $0.25 earned for each meal bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski indicated that this pricing strategy is part of McDonald’s approach to attract consumers who are feeling the effects of inflation, aiming to encourage them to make additional purchases beyond the $5 meal. However, the overall profitability of this deal hinges on several factors including the costs of ingredients, labor, and other overhead expenses.
Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, stated that the $5 meal deal is “more promotional than profitable,” emphasizing that even if it draws customers back to the restaurants, franchise owners may not necessarily benefit from the profits. Since about 95% of McDonald’s locations are franchise-owned, individual franchisees are responsible for setting their own prices and must also manage various costs such as rent, insurance, permits, and taxes.
Joe Erlinger, president of McDonald’s U.S., noted that franchise operators often implement promotional offers like the $5 meal deal to alleviate overhead costs. However, Spiegel characterized the combination meal as more of a “loss leader,” intended to attract and retain customers. She pointed out that when factors like labor, packaging, condiments, delivery charges, and marketing costs are taken into account, franchise owners often find that they effectively eliminate any potential profit from the deal.