McDonald’s is expected to earn a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the deal aims to attract cash-strapped consumers back into the restaurant, encouraging them to make additional purchases beyond the $5 offering.
However, profitability will depend on various factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, pointed out that the $5 meal deal is more promotional than lucrative.
Although the deal may draw customers back into McDonald’s, it does not guarantee that franchisees will benefit from the profits. About 95% of McDonald’s locations are franchise-owned, meaning that owners set their own prices and face additional costs such as rent, insurance, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often use promotional deals like the $5 meal to offset these overhead costs. Nevertheless, Spiegel described the bundle as a “loss leader,” aimed at attracting and retaining customers.
When considering extra expenses like labor, packaging, condiments, delivery fees, and marketing, she indicated that franchise owners may ultimately eliminate any profits on the deal.