McDonald’s is expected to generate a profit from its $5 meal deal, but it will be a minimal one. According to restaurant analyst Mark Kalinowski, the fast food chain’s profit margin on the combo meal is projected to range between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski noted that this deal is part of McDonald’s strategy to entice inflation-weary consumers back into their restaurants. The hope is that once customers enter, they will purchase additional items beyond the $5 meal.
However, profitability will hinge on various factors, such as ingredient costs, labor expenses, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, remarked that the $5 meal deal is “more promotional than profitable.”
Even if the combo meal succeeds in drawing customers back, that does not guarantee profits for franchise owners, as approximately 95% of McDonald’s outlets are franchisee-operated. These owners have the autonomy to set their own prices and are responsible for covering extra expenses, including rent, insurance, permits, and taxes.
In a statement made in May, McDonald’s U.S. president Joe Erlinger indicated that franchisees often try to offset overhead costs by offering promotions like the $5 meal deal. However, Spiegel emphasized that this bundle functions more as a “loss leader” designed to attract and retain customers. With the additional costs associated with labor, packaging, condiments, delivery, and marketing, she pointed out that franchise owners often find that these deals eliminate any potential profit on the items offered.