McDonald’s may see a slight profit from its $5 meal deal, but it is expected to be minimal. Restaurant analyst Mark Kalinowski estimates that the profit margin for this combo meal will be between 1% and 5%, translating to approximately $0.05 to $0.25 for each sale.
Kalinowski noted that this meal deal is part of McDonald’s strategy to attract consumers who are feeling the pinch of inflation, with the hope that once customers are in the restaurant, they will purchase additional items beyond the $5 offer.
However, profitability will depend on various factors including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Moreover, even if the meal attracts more diners, franchisees might not see the profits. Approximately 95% of McDonald’s locations are franchise-owned, meaning owners set their own prices and face various expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees often try to offset these overhead costs by offering promotions like the $5 meal deal. Nevertheless, Spiegel pointed out that the deal acts more as a “loss leader” aimed at capturing and retaining customers.
Considering the additional costs of labor, packaging, condiments, delivery, and marketing, Spiegel stated that franchise owners can essentially eliminate any potential profit from the items included in the meal deal.