McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins projected to be between 1% and 5%. This translates to approximately $0.05 to $0.25 per combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the promotion is designed to attract consumers feeling the pinch of inflation, encouraging them to purchase additional items beyond the $5 deal. However, the profitability of this offering will hinge on various factors including the cost of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She explained that although the deal may draw diners back into McDonald’s, it does not guarantee that franchise owners will benefit from the profits.
With approximately 95% of McDonald’s locations being franchise-owned, individual owners have the authority to set their own prices and manage expenses such as rent, insurance, permits, and taxes. In May, Joe Erlinger, president of McDonald’s U.S., indicated that franchisees often implement promotional offers like the $5 meal deal to help alleviate their overhead costs.
However, Spiegel emphasized that this meal bundle primarily serves as a “loss leader” aimed at attracting and retaining customers. When factoring in extra costs related to labor, packaging, condiments, delivery, and marketing, she concluded that franchise owners effectively eliminate any profit associated with the items included in the deal.