McDonald’s may see a slim profit from its $5 meal deal, but the margin is expected to be minimal. According to restaurant analyst Mark Kalinowski, the fast-food giant could earn a profit margin between 1% and 5%, translating to a mere $0.05 to $0.25 for each meal sold.
Kalinowski noted that this meal deal aims to attract consumers who are feeling the pinch of inflation, enticing them to enter the restaurant with the hope that they will purchase more than just the $5 meal. However, profitability will be influenced by several factors, including ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She pointed out that while the combo might increase foot traffic, franchise owners, who comprise approximately 95% of McDonald’s locations, may not fully benefit from these promotions. Franchisees set their own prices and are responsible for various expenses such as rent, insurance, permits, and taxes.
In a statement from May, U.S. president of McDonald’s Joe Erlinger indicated that franchisees utilize promotional offers like the $5 meal deal to help manage their overhead costs. Nevertheless, Spiegel remarked that the deal functions primarily as a “loss leader” to attract and retain customers. Once additional costs, including labor, packaging, condiments, delivery, and marketing are accounted for, she suggested that franchise owners may essentially eliminate any potential profit from this deal.