McDonald’s may see some profit from its $5 meal deal, but it will be limited. According to restaurant analyst Mark Kalinowski, the fast food chain’s profit margin on the combo is expected to range between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski noted that this deal is a strategy for McDonald’s to attract inflation-sensitive consumers back to its restaurants and encourage them to make additional purchases beyond the $5 offer.
However, profitability will hinge on various factors including the cost of ingredients, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, characterized the $5 meal as “more promotional than profitable.”
Spiegel explained that while the deal may boost customer visits, franchisees may not enjoy the profits. About 95% of McDonald’s locations are franchise-owned, meaning that franchise owners set their own prices and manage costs such as rent, insurance, permits, and taxes.
In May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees attempt to offset high overhead costs by offering promotions like the $5 meal deal. However, Spiegel described the combo as more of a “loss leader” meant to attract and retain customers.
When considering the additional expenses for labor, packaging, condiments, delivery fees, and marketing, she stated that franchise owners might effectively eliminate any profit from the items included in the deal.