McDonald’s aims to profit modestly from its $5 meal deal, with projections indicating a profit margin between 1% and 5%. This equates to approximately $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski.
The fast-food giant sees this strategy as a way to attract inflation-weary customers, encouraging them to spend beyond the $5 meal. However, the actual profitability will be influenced by various factors, including ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the meal deal as “more promotional than profitable.” She highlighted that while the combo might draw diners back, franchise owners may not necessarily benefit from these sales due to their responsibility for expenses like rent, insurance, permits, and taxes.
With approximately 95% of McDonald’s locations being franchise-operated, owners set their own prices and manage additional costs. In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often run promotional offers like the $5 meal deal to offset overhead expenses. Despite this, Spiegel pointed out that the deal primarily serves as a “loss leader,” aimed at attracting and retaining customers. After accounting for costs related to labor, packaging, condiments, delivery, and marketing, she stated that franchise owners might ultimately eliminate any profit from the items included in the deal.