McDonald’s may earn a small profit from its $5 meal deal, but the margins are expected to be quite slim, ranging between 1% and 5%, equating to approximately $0.05 to $0.25 per meal, according to restaurant analyst Mark Kalinowski.
This deal is part of McDonald’s strategy to attract consumers who are feeling the pinch of inflation, with the hope that once they enter the restaurant, they will purchase additional items beyond the $5 offer. However, the potential for profitability is influenced by various factors, including the costs of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, referred to the meal deal as “more promotional than profitable.” She noted that while the combo might draw customers back into the restaurant, it does not guarantee profit for franchise owners.
Approximately 95% of McDonald’s locations are franchise-owned, meaning these owners determine their own prices and manage their own expenses such as rent, insurance, permits, and taxes. In May, Joe Erlinger, the president of McDonald’s U.S., acknowledged that franchisees often use promotional strategies like the $5 deal to help offset overhead costs.
Despite the aim of boosting customer visits, Spiegel remarked that the bundle primarily serves as a “loss leader” designed to attract and retain customers. When additional costs such as labor, packaging, condiments, delivery fees, and marketing are taken into account, she stated that franchise owners often see minimal to no profit from these promotional items.