McDonald’s may make a profit from its $5 meal deal, but it will only be a modest one. Restaurant analyst Mark Kalinowski estimates that the profit margin on this combo could fall between 1% and 5%, translating to about $0.05 to $0.25 for every bundle sold.
This deal is McDonald’s way of enticing inflation-weary consumers back into their restaurants, hoping that once inside, customers will purchase more than just the $5 meal. However, turning a profit will depend on various factors, including the cost of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, describes the $5 meal deal as “more promotional than profitable.” Even if it brings diners back, it won’t guarantee profits for franchisees, as roughly 95% of McDonald’s locations are owner-operated. These franchisees set their own prices and manage additional costs such as rent, insurance, permits, and taxes.
McDonald’s U.S. president Joe Erlinger noted in May that franchisees use promotional offers like the $5 meal deal to mitigate overhead costs. However, Spiegel points out that the bundle serves more as a “loss leader” to retain customers. When factoring in additional expenses like labor, packaging, condiments, delivery charges, and marketing, franchisees essentially eliminate any potential profit on the items included in the deal.