McDonald’s is expected to generate some profit from its new $5 meal deal, although the margins will be quite limited. According to restaurant analyst Mark Kalinowski, the profit margin for this combo is projected to be between 1% and 5%, translating to earnings of about $0.05 to $0.25 for each meal sold.
Kalinowski suggested that the meal deal aims to attract customers who are feeling the pinch of inflation, encouraging them to make additional purchases once they are inside the restaurant. However, the actual profitability of the deal hinges on various factors, including the costs of ingredients, labor, and operational expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.” She added that while the combo might drive customers back to McDonald’s, franchisees might not directly benefit from these profits. This is because approximately 95% of McDonald’s locations are franchise-owned, meaning individual franchisees establish their own pricing and manage their own costs, including rent, insurance, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S. operations, stated that franchisees often use promotional strategies, like the $5 meal deal, to help offset their overhead expenses. However, Spiegel remarked that the combo serves more as a “loss leader” intended to attract or reacquire customers. When additional costs such as labor, packaging, condiments, delivery, and marketing are taken into account, she indicated that franchise owners often eliminate most, if not all, of the profit from the deal.