McDonald’s is set to earn a profit from its $5 meal deal, albeit a modest one. Restaurant analyst Mark Kalinowski estimates that the fast-food chain’s profit margin on the combo meal will be between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski noted that this deal aims to attract consumers who are feeling the pinch of inflation, with the hope that once they enter the restaurant, they will purchase additional items beyond the $5 offering. However, actual profitability will hinge on various factors, including ingredient costs, labor expenses, and overall overhead.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She emphasized that even if the combo succeeds in drawing customers back, it does not guarantee profits for franchise owners.
With about 95% of McDonald’s locations being franchise-operated, individual owners set their own prices and are responsible for various costs such as rent, insurance, permits, and taxes. In May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often attempt to alleviate such overhead expenses by offering promotional deals like the $5 meal.
However, Spiegel pointed out that when considering extra costs such as labor, packaging, condiments, delivery fees, and marketing, franchisees may end up eliminating any potential profit from the deal.