McDonald’s expects to earn a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski. This initiative is part of McDonald’s strategy to attract customers who are dealing with inflation, encouraging them to consider additional purchases beyond the $5 offering.
However, profitability will hinge on various factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the meal deal is “more promotional than profitable.” She pointed out that while the offer may bring diners back into the restaurant, franchisees may not necessarily benefit from those gains.
About 95% of McDonald’s locations are franchise-owned, meaning individual owners set their own prices and must handle additional costs such as rent, insurance, permits, and taxes. In May, Joe Erlinger, president of McDonald’s USA, mentioned that franchisees often use promotional deals like the $5 meal option to help alleviate overhead expenses.
Despite this, Spiegel characterized the meal bundle as a “loss leader” aimed at attracting and retaining customers. She explained that once extra costs for labor, packaging, condiments, delivery, and marketing are accounted for, franchise owners might find that their profits on the offer are virtually erased.