McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins projected 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.
Kalinowski noted that this initiative is part of McDonald’s strategy to entice consumers who are feeling the effects of inflation back into their restaurants, with the hope that once customers are inside, they will make additional purchases beyond the $5 meal.
However, the potential for profitability will largely depend on various factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, suggested that the $5 meal deal is “more promotional than profitable.”
While the meals could bring diners back to McDonald’s, Spiegel pointed out that this does not guarantee that franchisees will benefit financially. Approximately 95% of McDonald’s locations are franchisee-owned, meaning that the individual owners set their prices and must manage their own costs, which include rent, insurance, permits, and taxes.
In May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often run promotional deals like the $5 offering to help alleviate overhead expenses. However, Spiegel emphasized that this meal combo is seen more as a “loss leader” aimed at attracting customers rather than a profitable initiative.
Once factors such as labor costs, packaging, condiments, delivery fees, and marketing expenses are accounted for, she stated that franchise owners may effectively erase any profit from the items offered in the deal.