McDonald’s may see a modest profit from its $5 meal deal, with expected profit margins ranging from 1% to 5%, which translates to roughly $0.05 to $0.25 per combo sold, according to restaurant analyst Mark Kalinowski.
This initiative aims to entice consumers feeling the pinch of inflation back to McDonald’s, with the hope that once customers are inside, they will be persuaded to purchase more than just the $5 meal.
However, the potential profit is contingent on various factors including the costs of ingredients, labor, and other overhead expenses. Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.”
While the deal may draw diners into the restaurant, Spiegel emphasized that franchisees might not benefit from these profits due to the fact that about 95% of McDonald’s locations are franchise-owned. This means that franchise owners set their own prices and must manage additional expenses like rent, insurance, permits, and taxes.
In May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often try to counteract overhead costs by implementing promotional offers such as the $5 meal deal. However, Spiegel referred to the bundle as a “loss leader” intended to attract and retain customers. After accounting for the costs associated with labor, packaging, condiments, delivery, and marketing, she indicated that franchise owners may end up eliminating any potential profit from the deal.