McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins anticipated to range from 1% to 5%. This translates to roughly $0.05 to $0.25 earned for each combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this deal is part of McDonald’s strategy to attract consumers who are feeling the pinch of inflation, with the hope that once inside, customers will purchase more than just the $5 meal.
However, achieving profitability is contingent on several variables, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
She pointed out that while the combo might help bring diners back, franchisees may not see these profits. Approximately 95% of McDonald’s locations are franchise-operated, meaning individual owners set their own prices and manage various costs such as rent, insurance, permits, and taxes.
In a statement made in May, McDonald’s U.S. president Joe Erlinger indicated that franchisees often employ promotional offerings like the $5 meal deal to offset overhead costs. Nevertheless, Spiegel categorized the deal as a “loss leader” intended to attract and retain customers.
When accounting for the additional expenses related to labor, packaging, condiments, delivery, and marketing, Spiegel stated that franchise owners often effectively eliminate potential profits from the items included in the deal.