McDonald’s is introducing a $5 meal deal that may yield only a modest profit. According to restaurant analyst Mark Kalinowski, the profit margin for this combo is estimated to be between 1% and 5%, translating to a profit of about $0.05 to $0.25 per bundle sold.
The fast-food giant aims to attract budget-conscious consumers facing inflation with this deal, hoping that customers will also make additional purchases once they enter the restaurant. However, the ability to generate profit hinges on various factors, including the cost of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, stated that the $5 meal deal is “more promotional than profitable.” She noted that while the combo might draw diners back to restaurants, franchise owners may not see corresponding profits due to their autonomy in setting prices and managing expenses like rent, insurance, and taxes.
Approximately 95% of McDonald’s locations are franchise-owned, and they often rely on promotional offers, such as the $5 meal deal, to offset overhead costs. However, Spiegel described the bundle more as a “loss leader” intended to attract and retain customers. She emphasized that when additional expenses, including labor, packaging, condiments, delivery costs, and marketing, are accounted for, franchise owners could effectively eliminate any profit generated from the items included in the deal.