McDonald’s is expected to generate a modest profit from its $5 meal deal, but the margins are quite slim. According to restaurant analyst Mark Kalinowski, the profit margin on this combo could range from 1% to 5%, translating to approximately $0.05 to $0.25 for each set sold.
This strategy is aimed at attracting consumers who are feeling the effects of inflation, encouraging them not only to opt for the $5 meal but also to purchase additional items once they visit the restaurant.
However, the actual profitability of the meal deal hinges on various factors, including ingredient costs, labor expenses, and overall overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, emphasized that the $5 meal deal serves more as a promotional tool than a significant profit generator.
Moreover, with about 95% of McDonald’s outlets being franchise-owned, individual owners have the discretion to set their own prices and manage various operational costs, such as rent and insurance.
In May, Joe Erlinger, McDonald’s U.S. president, noted that franchisees often implement promotional offers like the $5 meal deal to help offset these overhead expenses. Nonetheless, Spiegel pointed out that when factoring in additional costs like labor, packaging, condiments, delivery fees, and marketing, franchise owners may end up erasing any profit margin from the deal.