McDonald’s may generate a profit from its $5 meal deal, but it is expected to be modest. According to restaurant analyst Mark Kalinowski, the profit margin on this combo meal is projected to be between 1% and 5%, translating to approximately $0.05 to $0.25 for each meal sold.
This offering is part of McDonald’s strategy to attract consumers struggling with inflation, with the hope that once customers enter the restaurant, they will purchase additional items beyond the $5 deal.
Profitability will also hinge on various factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, indicated that the $5 meal is more of a promotional effort than a significant profit generator.
Despite bringing customers through the door, franchisees may not necessarily benefit from the profits. With about 95% of McDonald’s locations operated by franchisees, these owners set their own prices and must manage increased costs, such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often implement promotional offers like the $5 deal to reduce overhead costs. However, Spiegel pointed out that this offering acts primarily as a “loss leader” designed to attract and retain customers. Once additional costs related to labor, packaging, condiments, delivery, and marketing are considered, franchise owners may find that it eliminates any profit associated with the meal deal.