McDonald’s is expected to earn a modest profit from its $5 meal deal, with profit margins projected to be between 1% and 5%, translating to approximately $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
The fast-food giant views this deal as a strategy to attract budget-conscious consumers facing inflation, hoping that once customers are in the restaurant, they will purchase additional items beyond the $5 offer.
However, the actual profitability will hinge on several factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is essentially “more promotional than profitable.”
While the combo might entice diners to visit, franchisees may not benefit from these profits as they are responsible for setting prices and managing expenses like rent, insurance, permits, and taxes; approximately 95% of McDonald’s locations are franchisee-owned.
In May, Joe Erlinger, McDonald’s U.S. president, indicated that franchisees utilize promotional offers, including the $5 meal deal, as a means to manage overhead costs. Still, Spiegel emphasized that due to added costs such as labor, packaging, condiments, delivery, and marketing, franchise owners could end up with little to no profit from these promotional items.