McDonald’s may generate a profit from its $5 meal deal, but it is expected to be minimal. According to restaurant analyst Mark Kalinowski, the profit margin on the combo meal is projected to be between 1% and 5%, translating to approximately $0.05 to $0.25 for each meal sold.
Kalinowski noted that this deal is part of McDonald’s strategy to attract consumers who are feeling the effects of inflation. The goal is to encourage them to make additional purchases beyond just the $5 offer.
However, the profitability of this meal deal will hinge on various factors, including the costs of ingredients, labor, and overall operational expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
While this offer may lure diners back into McDonald’s locations, it does not guarantee that franchise owners will see significant profits. With around 95% of McDonald’s locations being franchise-owned, individual owners set prices and must manage various costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S. operations, mentioned that franchisees often implement promotional deals like the $5 meal to counterbalance their overhead expenses. Nevertheless, Spiegel emphasized that this bundled offering serves primarily as a “loss leader” aimed at attracting and retaining customers.
When additional costs for labor, packaging, condiments, delivery, and marketing are considered, Spiegel indicated that many franchise owners would effectively eliminate any potential profit from the items included in the deal.