McDonald’s is expected to generate a profit from its $5 meal deal, although this profit is projected to be modest. Restaurant analyst Mark Kalinowski estimates that the profit margin on the combo will range from 1% to 5%, translating to approximately $0.05 to $0.25 for each meal sold.
Kalinowski notes that this deal is part of McDonald’s strategy to attract consumers who are feeling the effects of inflation, encouraging them to visit the restaurant and purchase additional items beyond the $5 offer.
However, the profitability of this deal will depend on various factors including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the meal deal as “more promotional than profitable.”
While the combo may entice customers back into the restaurants, it does not guarantee profits for franchise owners. Approximately 95% of McDonald’s locations are franchise-operated, meaning that franchisees determine their own pricing and are responsible for additional expenses such as rent, permits, insurance, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., indicated that franchisees often try to offset these overhead costs through promotional offers like the $5 meal deal. However, Spiegel emphasized that the package serves more as a “loss leader” aimed at attracting and retaining customers. When considering extra expenses such as labor, packaging, condiments, delivery fees, and marketing, franchise owners often find that they have little to no profit left from the items included in the deal.