McDonald’s may see a slight profit from its $5 meal deal, but it will likely be minimal. According to restaurant analyst Mark Kalinowski, the profit margin on this combo could range from 1% to 5%, translating to about $0.05 to $0.25 for each bundle sold.
Kalinowski noted that this deal is part of McDonald’s strategy to attract consumers who are feeling the pinch of inflation and encourage them to purchase more than just the $5 meal. However, profitability is contingent on various factors, such as ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.” She pointed out that even if the meal deal draws customers back into the restaurants, it may not guarantee profits for franchisees.
Approximately 95% of McDonald’s locations are franchisee-owned, meaning that individual owners set their own prices and deal with added expenses such as rent, insurance, and taxes. In May, Joe Erlinger, McDonald’s U.S. president, indicated that franchisees often try to offset these overhead costs by introducing promotional offers like the $5 meal.
Nonetheless, Spiegel described the deal as primarily a “loss leader” aimed at attracting and retaining customers. Once the associated costs of labor, packaging, condiments, delivery fees, and marketing are considered, she noted that franchisees may “essentially eliminate any profit on any one or all of the items in the deal.”