McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%. This translates to a profit of approximately $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski.
The fast-food giant aims to attract consumers who are feeling the pinch of inflation, hoping that those who come for the deal may purchase additional items. However, the company’s ability to achieve profitability with this offer hinges on various factors, including the rising costs of ingredients, labor, and other overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She noted that while the combo meal might increase customer footfall, franchise owners may not necessarily benefit from the resulting sales.
Approximately 95% of McDonald’s restaurants are franchise-operated, meaning that individual franchisees determine their own pricing while absorbing additional costs like rent, insurance, permits, and taxes.
Joe Erlinger, McDonald’s U.S. president, mentioned in May that franchisees often implement promotional offers, such as the $5 meal deal, to help manage overhead expenses. Nevertheless, Spiegel emphasized that the meal package often serves as a “loss leader” aimed at attracting and retaining customers. After considering the expenses associated with labor, packaging, condiments, delivery, and marketing, Spiegel concluded that franchise owners may end up negating any potential profit from the promotional offering.