McDonald’s may see limited profits from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to roughly $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski. The fast food giant is introducing this deal to attract budget-conscious consumers affected by inflation, hoping that once customers enter the restaurant, they will purchase additional items beyond the $5 offering.
However, profitability is contingent upon various factors, including the costs of ingredients, labor, and operational expenses. Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.”
Even if the meal deal succeeds in drawing customers back, franchise owners may not benefit from any resultant profits. Approximately 95% of McDonald’s locations are franchise-owned, meaning that these owners determine their pricing and must also manage additional expenses such as rent, insurance, permits, and taxes.
McDonald’s U.S. president Joe Erlinger noted in May that franchisees often use promotional offers like the $5 meal deal to help offset their overhead costs. Nevertheless, Spiegel stressed that the deal functions more as a “loss leader” aimed at attracting and retaining customers, and when factoring in expenses such as labor, packaging, condiments, delivery charges, and marketing, franchise owners may ultimately find that they lose any potential profit on these combined items.