McDonald’s is expected to generate a modest profit from its $5 meal deal, with estimates suggesting a profit margin between 1% and 5%, equating to approximately $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
This initiative aims to attract consumers feeling the impact of inflation, encouraging them to visit the restaurant and potentially buy more than just the $5 combo. However, profitability will hinge on various factors, including the costs of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, noted that the meal deal is “more promotional than profitable.” She added that even if the combo encourages diners to return, franchise owners may not benefit financially. Approximately 95% of McDonald’s locations are franchisee-owned, meaning that franchisees set prices and are responsible for additional expenses like rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, highlighted that franchisees often use promotional deals like the $5 meal to manage overhead costs. Despite this, Spiegel described the bundle as more of a “loss leader to capture and re-capture guests.” She emphasized that once the various costs associated with labor, packaging, condiments, delivery, and marketing are taken into account, franchise owners may find that profits are minimized or eliminated altogether.