McDonald’s is poised to see a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, which translates to an earnings range of $0.05 to $0.25 for each meal bundle sold, according to restaurant analyst Mark Kalinowski.
This promotional offering aims to attract consumers who are feeling the strain of inflation, encouraging them to return to the restaurant and potentially purchase additional items beyond the $5 combo. However, the overall profitability of the deal will depend on several factors, including the costs of ingredients, labor, and overhead.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She noted that while the deal may draw customers back to McDonald’s, it doesn’t guarantee profits for franchise owners. Nearly 95% of McDonald’s locations are franchisee-owned, meaning individual owners set their own prices and must manage additional expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often rely on promotional offers, including the $5 meal, to mitigate overhead costs. However, Spiegel pointed out that when considering the extra expenses associated with labor, packaging, condiments, delivery, and marketing, franchise owners often find that any potential profit from the deal is significantly diminished.