McDonald’s may find a way to profit from its $5 meal deal, but the gains are expected to be minimal. A recent analysis suggests that the fast food giant could see a profit margin between 1% and 5% on this combo, translating to roughly $0.05 to $0.25 for each sale, according to restaurant expert Mark Kalinowski.
Kalinowski pointed out that the promotional meal deal is a strategy to attract budget-conscious customers amid rising inflation. The hope is that once customers are drawn in by the $5 meal, they will purchase additional items.
However, profitability will hinge on various factors, including the costs of ingredients, labor, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, remarked that the meal deal is “more promotional than profitable.”
Even if the promotion successfully lures diners back, franchisees might not reap significant benefits, since approximately 95% of McDonald’s restaurants are franchise-owned. These owners set their own prices while also managing additional expenses such as rent, insurance, and taxes.
In a statement made in May, Joe Erlinger, the president of McDonald’s U.S., noted that franchisees often employ promotional offers like the $5 meal to help manage their overhead costs. Nevertheless, Spiegel suggested that the deal acts more as a “loss leader” intended to attract and retain customers.
When considering labor, packaging, delivery charges, and marketing costs, Spiegel indicated that franchise owners could ultimately eliminate any potential profit from the meal deal.