McDonald’s is anticipated to generate a modest profit from its $5 meal deal, with margins estimated between 1% and 5%, translating to earnings of approximately $0.05 to $0.25 per meal bundle, according to restaurant analyst Mark Kalinowski.
The initiative aims to attract cost-conscious consumers facing inflation and encourages them to purchase more than just the $5 meal when they visit the restaurant.
However, profitability is contingent upon several factors, including ingredient costs, labor expenses, and overhead. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.”
While the combo offer may bring customers back to McDonald’s, it does not guarantee that franchise owners will see any benefits. With about 95% of McDonald’s locations being franchisee-owned, individual owners must establish their own pricing and manage various expenses such as rent, insurance, permits, and taxes.
In a previous statement, Joe Erlinger, president of McDonald’s U.S., noted that franchisees often use promotional deals, like the $5 meal offer, to reduce their overhead costs. Nonetheless, Spiegel emphasized that the deal functions more as a “loss leader” aimed at attracting and retaining customers.
After accounting for various costs including labor, packaging, condiments, delivery charges, and marketing, she indicated that franchise owners may eliminate any potential profit from the items included in the meal deal.