McDonald’s may generate a profit from its $5 meal deal, but it is expected to be a modest gain. The fast-food giant is currently contending with its first lawsuit related to an E. coli outbreak linked to its Quarter Pounder.
According to restaurant analyst Mark Kalinowski, the profit margin on the combo meal is anticipated to range between 1% and 5%, equating to approximately $0.05 to $0.25 for each bundle sold. Kalinowski noted that this deal is a strategy to draw inflation-weary consumers back into restaurants, with the hope that they will purchase additional items beyond the $5 offering.
However, profit generation will rely on several factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Spiegel explained that while the combo aims to attract diners back into the establishment, franchise owners may not necessarily benefit from those profits. Approximately 95% of McDonald’s locations are franchise-operated, meaning these owners have the authority to set their own prices and manage added costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, the president of McDonald’s U.S., mentioned that franchisees often attempt to offset overhead costs through promotional offers like the $5 meal deal. Nevertheless, Spiegel remarked that the meal bundles function more as a “loss leader to capture and re-capture guests.”
After accounting for additional expenses such as labor, packaging, condiments, delivery charges, and marketing, she asserted that franchise owners effectively eliminate any profit margin on the items included in the deal.