McDonald’s is set to introduce a $5 meal deal that could yield only a slight profit margin. According to restaurant analyst Mark Kalinowski, the fast food giant may earn between 1% and 5% on this combo, translating to roughly $0.05 to $0.25 for each meal sold.
Kalinowski noted that this deal is one of McDonald’s strategies to attract consumers who are feeling the pinch of inflation. The goal is not only to entice them with the $5 offer but also to encourage them to spend more once they visit the restaurant.
However, profitability will largely hinge on several factors, including the cost of raw materials, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.”
She explained that while this offering might draw customers back in, franchise owners may not necessarily benefit from the profits. With approximately 95% of McDonald’s locations being franchise-owned, these operators determine their own pricing and face additional expenses such as rent, insurance, permits, and taxes.
In a statement from May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often implement promotional deals like the $5 meal to help offset overhead costs. Nevertheless, Spiegel referred to the bundle as primarily a “loss leader” aimed at capturing and retaining customers. After accounting for extra expenses associated with labor, packaging, condiments, delivery, and marketing, she indicated that owners may end up losing any potential profit from the meal deal.