McDonald’s anticipates a modest profit from its $5 meal deal, with profit margins expected to fall between 1% and 5%, translating to roughly $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski.
This meal deal is part of McDonald’s strategy to attract cost-conscious consumers who are facing inflation. The chain hopes that once customers enter the store for the $5 offering, they will also make additional purchases.
However, the profitability of this deal is contingent on various factors, including the fluctuating costs of ingredients, labor, and overall operational expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the meal deal is primarily promotional rather than profitable.
Furthermore, the vast majority of McDonald’s locations—approximately 95%—are franchisee-owned. As a result, franchisees set their own prices and must manage additional expenses such as rent, insurance, permits, and taxes, which may impact their profits even if the combo attracts more customers.
In May, Joe Erlinger, president of McDonald’s U.S., indicated that franchisees often implement promotional pricing, such as the $5 meal deal, to help alleviate overhead costs. Nevertheless, Spiegel emphasized that this deal acts more like a “loss leader” aimed at attracting customers rather than generating actual profit. After accounting for expenses related to labor, packaging, condiments, delivery, and marketing, franchise owners often find that they lose money on the items included in the deal.