McDonald’s may see a profit from its $5 meal deal, albeit a modest one. According to restaurant analyst Mark Kalinowski, the expected profit margin for the combo meal is between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski noted that the promotion aims to attract inflation-weary customers back into the restaurant, with the hope that once they are in, they will purchase more items beyond just the $5 offer.
However, profitability will depend on various factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as being “more promotional than profitable.”
Moreover, even if the combo attracts diners, it may not guarantee that franchisees will see real profits. Approximately 95% of McDonald’s locations are franchisee-owned, meaning the franchisees determine their own prices and are responsible for expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, the president of McDonald’s U.S., indicated that franchisees often manage overhead costs by offering promotional deals like the $5 meal deal. Spiegel emphasized that this offer functions more as a “loss leader to capture and re-capture guests.” After accounting for additional expenses associated with labor, packaging, condiments, delivery, and marketing, owners may effectively eliminate any potential profit from the deal.