McDonald’s is expected to achieve a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to earnings of $0.05 to $0.25 per combo sold, according to restaurant analyst Mark Kalinowski.
This initiative is aimed at attracting consumers who are feeling the effects of inflation, encouraging them to visit the restaurants and potentially purchase additional items beyond the $5 offer. However, profitability will be contingent on various factors, including the costs of ingredients, labor, and overhead expenses.
Consultant Arlene Spiegel noted that the $5 meal deal is “more promotional than profitable.” While it may draw customers back to McDonald’s locations, franchise owners may not benefit from the profits. Approximately 95% of McDonald’s locations are franchise-owned, which means individual owners set their own prices and manage various expenses, including rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees often run promotional offers like the $5 meal deal to offset these overhead costs. However, Spiegel emphasized that this bundle serves primarily as a “loss leader” to attract customers. When factoring in additional costs such as labor, packaging, condiments, delivery fees, and marketing, owners often find that these expenses negate any potential profits from the items included in the deal.