McDonald’s is anticipating a modest profit from its $5 meal deal, with profit margins estimated to range between 1% and 5%, equating to roughly $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski suggests that this promotional offering aims to attract inflation-weary consumers back to the restaurant, with the hope that once they arrive, they will purchase additional items beyond the $5 meal.
However, the profitability of this deal will depend on various factors, including ingredient costs, labor expenses, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 deal is more focused on promotion than generating significant profits.
Though the meal deal may lead to increased foot traffic, it does not guarantee franchise owners will benefit from these profits. Approximately 95% of McDonald’s locations are franchisee-operated, which means individual owners determine their own pricing while managing their own expenses, including rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, stated that franchisees often implement promotional deals like the $5 meal to help counteract overhead costs. Nonetheless, Spiegel emphasized that the bundle serves primarily as a “loss leader” to attract and retain customers. After accounting for additional costs such as labor, packaging, condiments, delivery fees, and marketing, franchise owners often find that their potential profits are negated.