McDonald’s is expected to generate a small profit from its $5 meal deal, with margins estimated between 1% and 5%. This translates to earnings of approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski. The fast-food giant aims to draw in consumers who are struggling with inflation, encouraging them to spend more than the promotional offer.
However, the actual profitability can be influenced by various factors such as ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the meal deal as being “more promotional than profitable.”
While the initiative may attract diners back to the restaurant, it does not guarantee profits for franchisees, who own around 95% of McDonald’s locations. These franchise owners are responsible for setting their own prices and handling expenses like rent, insurance, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often use promotional offers like the $5 meal deal to help manage their overhead costs. Still, Spiegel referred to the deal as more of a “loss leader” aimed at attracting customers. She noted that once additional expenses related to labor, packaging, condiments, delivery, and marketing are considered, franchisees may end up losing any potential profits from the meal deal.