McDonald’s is expected to make a profit from its $5 meal deal, although the gains will be minimal. Restaurant analyst Mark Kalinowski projects that the profit margin for this combo will range from 1% to 5%, translating to approximately $0.05 to $0.25 per meal sold.
Kalinowski emphasizes that the meal deal is a strategy for McDonald’s to attract inflation-sensitive consumers back to their restaurants with the hope that while they are there, they will purchase additional items beyond the $5 offering.
However, turning a profit will be contingent on various factors including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal as “more promotional than profitable.”
Additionally, even if the meal deal succeeds in drawing customers, franchise owners may not see significant profits from it. Approximately 95% of McDonald’s locations are franchisee-owned, meaning they set their own prices and manage added costs like rent, insurance, permits, and taxes.
In a statement made in May, Joe Erlinger, president of McDonald’s USA, indicated that franchisees often implement promotional offers like the $5 meal deal to offset these overhead costs. However, Spiegel described the deal as a “loss leader” aimed at attracting customers rather than generating substantial profit.
When considering the extra expenses related to labor, packaging, condiments, delivery fees, and marketing, Spiegel stated that franchise owners essentially eliminate any potential profit from the meal deal.