McDonald’s may see only a modest profit from its recent $5 meal deal. According to restaurant analyst Mark Kalinowski, the fast-food chain’s profit margin on the combo is expected to be between 1% and 5%, translating to earnings of approximately $0.05 to $0.25 for each meal sold.
This promotional offering is aimed at attracting inflation-sensitive consumers back to the restaurant, encouraging them to purchase additional items beyond the $5 deal. However, profitability will be contingent on various factors, including the costs of ingredients, labor, and overhead.
Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal serves more as a promotional tool than a key revenue generator. Even if the deal successfully brings customers back, it doesn’t guarantee profits for franchise owners. Approximately 95% of McDonald’s locations are franchisee-owned, meaning franchisees set their own pricing and must manage costs such as rent, insurance, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S. operations, mentioned that franchisees often use promotional offers like the $5 meal to offset overhead expenses. However, Spiegel argues that these bundles are primarily a “loss leader” strategy designed to attract customers. When considering the additional expenses related to labor, packaging, condiments, delivery, and marketing, franchise owners might end up eliminating any potential profits from the meal deal.