McDonald’s is expected to generate a profit from its $5 meal deal, but it will be limited. According to restaurant analyst Mark Kalinowski, the fast food chain’s profit margin on this combo is projected to be between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski noted that this promotion aims to attract consumers who are feeling the pinch of inflation, encouraging them to visit the restaurant and potentially purchase additional items beyond the $5 offer.
However, the feasibility of making a profit hinges on factors like ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, emphasized that the $5 meal deal is “more promotional than profitable.” She mentioned that while bringing customers back is a positive, it does not guarantee profits for franchise owners.
About 95% of McDonald’s locations are franchises, and those owners have the autonomy to set their own prices while managing additional expenses such as rent, insurance, permits, and taxes.
Joe Erlinger, president of McDonald’s U.S., stated in May that franchisees utilize promotional deals like the $5 meal to help manage their overhead costs. Despite this strategy, Spiegel described the meal deal as primarily a “loss leader” designed to attract and retain customers. She pointed out that when accounting for labor, packaging, condiments, delivery, and marketing expenses, franchise owners may end up erasing any potential profit from the deal.