McDonald’s is expected to generate modest profits from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to approximately $0.05 to $0.25 per combo sold, as stated by restaurant analyst Mark Kalinowski.
This initiative aims to attract consumers who are feeling the effects of inflation, encouraging them to purchase more items beyond the $5 offering. However, profitability will be influenced by various factors, including the cost of ingredients, labor, and overall operational expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 deal is primarily a promotional strategy rather than a significant revenue generator. She pointed out that even with increased customer traffic, franchisees might not benefit from these sales due to the nature of their businesses, as approximately 95% of McDonald’s locations are franchise-owned. Franchise owners set their own prices and must manage various expenses, including rent, insurance, permits, and taxes.
In a recent statement, Joe Erlinger, president of McDonald’s USA, explained that franchisees often implement promotional offers like the $5 meal deal to help mitigate overhead costs. However, Spiegel emphasized that this bundle functions more as a “loss leader” meant to attract and retain customers. Considering additional costs such as labor, packaging, condiments, delivery fees, and marketing, owners may find it difficult to achieve any profit from these deals.