McDonald’s is expected to achieve only a modest profit from its $5 meal deal, with profit margins anticipated to range between 1% and 5%. This translates to a profit of approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the meal deal is part of McDonald’s strategy to attract consumers who are feeling the pinch of inflation, with the hope that once customers are drawn in, they will purchase additional items beyond the $5 offer.
The potential for profit hinges on several factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, referred to the $5 meal deal as “more promotional than profitable.”
She explained that while the combo might successfully bring customers back, franchise owners may not enjoy those profits. Approximately 95% of McDonald’s locations are franchise-owned, meaning that individual owners determine their own pricing and manage additional expenses such as rent, insurance, permits, and taxes.
In May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often look to reduce overhead by offering promotions like the $5 meal deal. However, Spiegel indicated that the bundle primarily serves as a “loss leader” to attract and retain customers.
Once considerations for labor, packaging, condiments, delivery charges, and marketing are included, Spiegel stated that owners often lose out on profits from each item in the deal.