McDonald’s may earn a modest profit from its $5 meal deal, but the margins are expected to be quite low. According to restaurant analyst Mark Kalinowski, the profit margin for the combo is likely between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski noted that this deal aims to attract consumers who are feeling the pinch of inflation, hoping to encourage them to purchase more than just the $5 meal. However, the overall profitability of the deal is contingent upon various factors, including ingredient costs, labor expenses, and overhead.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She emphasized that just because diners might return to the restaurant due to the deal, franchise owners may not necessarily reap the benefits.
With around 95% of McDonald’s locations being franchisee-owned, individual owners set their own pricing and manage extra costs such as rent, insurance, permits, and taxes. McDonald’s U.S. president Joe Erlinger previously mentioned that franchisees often try to offset these overheads through promotional offers like the $5 meal.
Nonetheless, Spiegel pointed out that the bundle serves more as a “loss leader to capture and re-capture guests.” After accounting for added expenses such as labor, packaging, condiments, delivery fees, and marketing, she indicated that franchise owners might end up losing any potential profit from the deal.