McDonald’s may see some profit from its $5 meal deal, but it is expected to be modest. According to restaurant analyst Mark Kalinowski, the fast-food chain is likely to achieve a profit margin on the combo ranging from 1% to 5%, which translates 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, encouraging them to enter the restaurant and potentially purchase additional items beyond the $5 offering.
However, profitability is influenced by various factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, characterized the $5 meal deal as being “more promotional than profitable.”
Furthermore, despite the potential for increased customer traffic, franchise owners may not experience significant profits. Approximately 95% of McDonald’s restaurants are franchise-owned, meaning these owners set their own prices and incur extra costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often launch promotional deals, like the $5 meal, to offset their overhead expenses. Nevertheless, Spiegel described the meal deal as essentially a “loss leader” intended to attract and retain customers. After accounting for the expenses related to labor, packaging, condiments, delivery, and marketing, franchise owners may find their profits significantly diminished or eliminated with this deal.