McDonald’s is expected to generate a profit from its $5 meal deal, although the profit margins are projected to be modest. According to restaurant analyst Mark Kalinowski, the profit margin on the combo meal could range from 1% to 5%, translating to approximately $0.05 to $0.25 per meal sold.
Kalinowski noted that the meal deal is part of McDonald’s strategy to attract inflation-sensitive consumers back to their locations, with hopes that once inside, customers will purchase additional items beyond the $5 offer.
However, the overall profitability will hinge on various factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, emphasized that the $5 meal deal is designed to be more promotional than profitable.
Despite potentially drawing in patrons, franchisees may not see significant profits, as nearly 95% of McDonald’s restaurants are owned by franchisees who control pricing and must manage various expenses, including rent and taxes.
In May, Joe Erlinger, president of McDonald’s USA, mentioned that franchisees often use promotional deals like the $5 meal to alleviate overhead costs. Nevertheless, Spiegel pointed out that once factors such as labor, packaging, condiments, delivery costs, and marketing are taken into account, franchise owners could end up with little to no profit from the offer.