McDonald’s could potentially turn a profit from its $5 meal deal, though it will be modest.
Restaurant analyst Mark Kalinowski estimates that the fast food chain’s profit margin on the combo will range between 1% and 5%, equating to about $0.05 to $0.25 per bundle sold.
Kalinowski mentions that the deal aims to attract consumers affected by inflation, encouraging them to purchase more than just the $5 meal.
However, profiting from the deal depends on various factors, such as ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, says the $5 deal is more promotional than profitable. Even if it attracts diners, franchisees might not see significant profits from it.
About 95% of McDonald’s locations are franchisee-owned, meaning franchisees set their own prices and manage additional costs like rent, insurance, permits, and taxes.
In May, McDonald’s U.S. president Joe Erlinger noted that franchisees try to mitigate overhead costs with promotional offers like the $5 meal deal.
Despite this, Spiegel describes the bundle as a “loss leader” meant to draw in and retain guests. She explains that once all additional costs, such as labor, packaging, condiments, delivery charges, and marketing, are considered, franchise owners may see any potential profit wiped out.