McDonald’s is expected to see only a modest profit from its $5 meal deal, with projections indicating a profit margin between 1% and 5%. This translates to earnings of approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
The fast-food giant is aiming to attract consumers who are feeling the impact of inflation, hoping that once they enter the restaurant for the $5 deal, they will be inclined to purchase additional items.
However, the profitability of this deal will hinge on various factors, including ingredient costs, labor expenses, and overhead. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, emphasized that the $5 meal deal is “more promotional than profitable.”
She noted that while the deal may bring customers back into the restaurants, franchise owners may not reap the benefits as they operate under their own pricing and must cover additional costs such as rent, insurance, permits, and taxes.
In a statement made in May, Joe Erlinger, the president of McDonald’s U.S., mentioned that franchisees often offer promotional deals like the $5 meal to help manage overhead expenses. Nevertheless, Spiegel referred to the deal as a “loss leader,” intended to attract guests rather than generate significant profit.
Once all associated costs, including labor, packaging, condiments, delivery fees, and marketing, are accounted for, Spiegel stated that franchise owners might find that they effectively eliminate any potential profit from the items included in the deal.