McDonald’s is anticipated to see a small profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to around $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this deal aims to attract consumers who are feeling the effects of inflation, with the hope that once customers are in the restaurant, they will purchase additional items beyond the $5 meal.
However, profitability is contingent on various factors, including the fluctuating costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Though the combo may entice diners back to McDonald’s, it’s unclear whether franchisees will benefit from the associated profits. Approximately 95% of McDonald’s locations are franchisee-owned, meaning that individual owners set their own prices and must manage additional expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees often use promotional offerings like the $5 meal deal to help offset their overhead costs. Nevertheless, Spiegel characterized the $5 bundle as a “loss leader” meant to attract and retain customers. She added that once all costs, including labor, packaging, condiments, delivery fees, and marketing, are taken into account, owners may ultimately lose any profit on the items included in the deal.