McDonald’s is poised to earn a modest profit from its recently introduced $5 meal deal, according to restaurant analyst Mark Kalinowski. The profit margin for this combo is expected to range from 1% to 5%, equating to approximately $0.05 to $0.25 per bundle sold.
Kalinowski noted that this meal deal aims to attract consumers who are feeling the pressures of inflation. The strategy is to encourage customers to enter the restaurant and potentially spend more than just on the $5 offering.
However, the profitability of the deal relies on various factors, including the cost of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.”
She remarked that even if the deal draws diners back, it may not guarantee profits for franchisees, who own about 95% of McDonald’s locations. These owners set their own prices and bear various costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often implement promotional offers like the $5 meal deal to offset overhead expenses. Despite this, Spiegel referred to the bundle as a “loss leader” intended to attract customers, indicating that when factoring in labor, packaging, condiments, delivery charges, and marketing costs, franchise owners may find little to no profit from the deal’s items.