McDonald’s is set to introduce a $5 meal deal that may yield only a modest profit for the fast-food giant. According to restaurant analyst Mark Kalinowski, the anticipated profit margin for this combo will range between 1% and 5%, equating to approximately $0.05 to $0.25 per meal sold.
Kalinowski indicated that this strategy aims to attract budget-conscious consumers who have been impacted by inflation. The hope is that once customers arrive, they will be persuaded to purchase more than just the $5 meal.
However, the profitability of this deal depends on various factors, including ingredient costs, labor, and other overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
While the deal may draw customers back into McDonald’s restaurants, it does not guarantee profits for franchise owners. Approximately 95% of McDonald’s locations are franchised, giving owners autonomy over pricing and subjecting them to additional costs such as rent, insurance, permits, and taxes.
In a statement from May, Joe Erlinger, president of McDonald’s U.S., noted that franchisees often implement promotional offers like the $5 meal deal to help manage overhead expenses. Despite this, Spiegel pointed out that the bundle serves mainly as a “loss leader” intended to draw patrons in and retain their business. Once all associated costs—such as labor, packaging, condiments, delivery fees, and marketing—are taken into account, she explained that franchise owners often find themselves with little to no profit.