McDonald’s is expected to generate modest profits from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to roughly $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
This meal deal serves as a strategy for McDonald’s to attract inflation-weary consumers back to their locations, with hopes that once inside, customers will purchase additional items beyond the $5 offering. However, profitability will be influenced by various factors including ingredient costs, labor, and operational expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, pointed out that while the meal deal attracts customers, it is seen as “more promotional than profitable.” It may not guarantee that franchise owners will benefit from the increased foot traffic, as approximately 95% of McDonald’s are franchise-operated. Franchisees set their own prices and must manage additional costs such as rent, insurance, permits, and taxes.
Joe Erlinger, president of McDonald’s U.S., mentioned in May that franchisees often use promotional deals like the $5 meal to help counteract these overhead costs. Nonetheless, Spiegel emphasized that the bundle often acts as a “loss leader” aimed at drawing in customers. When considering expenses such as labor, packaging, condiments, delivery fees, and marketing, franchise owners may find that potential profits are largely minimized or eliminated altogether.