McDonald’s may see only a small profit from its $5 meal deal, according to restaurant analyst Mark Kalinowski. The projected profit margin on this combo meal could be between 1% and 5%, translating to approximately $0.05 to $0.25 for each meal sold.
Kalinowski believes that this offer aims to attract consumers who are feeling the effects of inflation and encourage them to make additional purchases beyond the $5 deal. However, profitability will also rely on various other factors, such as the costs of ingredients, labor, and overall operational expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the meal deal as “more promotional than profitable.” Although the deal may help draw customers back into the restaurant, it might not guarantee that franchise owners will enjoy the profits, as about 95% of McDonald’s locations are franchisee-owned. These owners determine their own pricing and face additional expenses, including rent, insurance, permits, and taxes.
In a previous statement, Joe Erlinger, president of McDonald’s U.S., noted that franchisees often launch promotional offers like the $5 meal deal to help manage high overhead costs. However, Spiegel indicated that the deal functions primarily as a “loss leader to capture and re-capture guests.” She cautioned that once the expenses for labor, packaging, condiments, delivery, and marketing are accounted for, the potential profits from the meal deal are significantly diminished for franchise owners.