McDonald’s is poised 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, as noted by restaurant analyst Mark Kalinowski.
This meal promotion is part of McDonald’s strategy to attract inflation-sensitive consumers back to its restaurants, with the hope that once inside, they will purchase additional items beyond just the $5 deal.
Profitability from this initiative will be influenced by several factors, including ingredient costs, labor expenses, and general overheads. Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.”
She also pointed out that while the deal may drive more customers into the restaurants, franchise owners may not necessarily share in the profits. Approximately 95% of McDonald’s locations are franchise-operated, meaning these owners are responsible for setting their own prices and managing added expenses like rent, insurance, permits, and taxes.
In comments made in May, Joe Erlinger, the president of McDonald’s U.S., indicated that franchisees often implement promotional offers like the $5 meal deal to help offset overhead costs. However, Spiegel described the bundle as primarily a “loss leader aimed at capturing and re-capturing customers.” She explained that when considering additional costs such as labor, packaging, condiments, delivery fees, and marketing, franchise owners typically eliminate any potential profit from the deal.