McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins likely ranging from 1% to 5%, translating to earnings of approximately $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
This deal is part of McDonald’s strategy to attract consumers who are feeling the pinch of inflation, with the hope that once customers are drawn in by the $5 offer, they may purchase additional items.
However, the potential for profitability is influenced by various factors, including ingredient costs, labor, and other overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.”
While the combo may entice more diners into McDonald’s locations, it does not guarantee that franchise owners will reap the benefits, as they determine their own pricing and bear additional costs, such as rent and taxes, with approximately 95% of McDonald’s locations operated by franchisees.
In May, McDonald’s U.S. president Joe Erlinger stated that franchisees often use promotional offers like the $5 meal deal to help alleviate overhead costs. Nonetheless, Spiegel described the offering primarily as a “loss leader” aimed at attracting and retaining customers. She indicated that when additional expenses such as labor, packaging, condiments, delivery, and marketing are considered, franchise owners might effectively negate any potential profit from the meal deal.