McDonald’s has introduced a $5 meal deal, which could yield a modest profit margin for the fast-food giant. According to restaurant analyst Mark Kalinowski, the expected profit margin on this combo meal is likely to range between 1% and 5%, translating to roughly $0.05 to $0.25 per bundle sold.
This meal deal is part of McDonald’s strategy to entice consumers who are feeling the effects of inflation to return to their restaurants. The idea is that once customers enter the establishment, they might be tempted to make additional purchases beyond the $5 offering.
However, the profitability of this meal deal relies on several factors, such as ingredient costs, labor expenses, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
She noted that while the deal could successfully draw customers back into the restaurants, franchise owners, who manage approximately 95% of McDonald’s locations, may not see the financial benefits. Franchisees set their own prices and are responsible for various costs, including rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, acknowledged that franchisees often create promotional offers like the $5 meal deal to help offset those overhead costs. Nonetheless, Spiegel emphasized that the bundle functions as a “loss leader” aimed at attracting customers, and after accounting for additional expenses such as labor, packaging, condiments, delivery charges, and marketing, franchise owners may find that their profits are significantly diminished or eliminated altogether.