McDonald’s anticipates a modest profit from its $5 meal deal, with profit margins projected between 1% and 5%. This translates to approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the meal deal is part of McDonald’s strategy to attract budget-conscious consumers affected by inflation, aiming to encourage them to purchase additional items once inside the restaurant.
However, the actual profitability of the deal hinges on various factors, including ingredient costs, labor, and general overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal as “more promotional than profitable.”
Additionally, the profits from this deal may not fully benefit franchise owners, as approximately 95% of McDonald’s locations are franchise-operated. Franchisees have the autonomy to set their own prices and manage costs related to rent, insurance, permits, and taxes.
In May, Joe Erlinger, the U.S. president of McDonald’s, pointed out that franchisees often utilize promotional deals like the $5 meal to help offset overhead expenses. Nevertheless, Spiegel emphasized that the bundle serves primarily as a “loss leader” aimed at attracting and retaining customers. Once the costs of labor, packaging, condiments, delivery, and marketing are taken into account, she indicated that franchise owners could effectively eliminate any profits from the items included in the offer.