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 on the combo is between 1% and 5%, which translates to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski explained that this promotion is designed to attract inflation-weary consumers back to the fast-food chain, with the goal of encouraging them to purchase additional items beyond the $5 offering. However, the profitability of the deal will be influenced by several factors, including the costs of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.” She emphasized that while this combo might drive customers back into the restaurant, franchisees might not reap the benefits of increased sales.
With about 95% of McDonald’s locations being franchise-owned, individual owners set their own prices and must manage additional expenses like rent, insurance, permits, and taxes. In May, Joe Erlinger, president of McDonald’s U.S., noted that franchisees implement promotional offers such as the $5 meal deal to help offset these overhead costs.
However, Spiegel pointed out that the meal bundle acts mainly as a “loss leader to capture and recapture guests.” Once expenses related to labor, packaging, condiments, delivery charges, and marketing are taken into account, franchise owners could end up losing any potential profit from the items included in the deal.