McDonald’s is expected to earn only a modest profit from its new $5 meal deal, with estimated profit margins ranging from 1% to 5%, equating to approximately $0.05 to $0.25 for each combo sold, according to analyst Mark Kalinowski.
This promotion aims to attract customers who are feeling the pinch of inflation and encourage them to purchase more than just the $5 meal. However, profitability will largely hinge on factors including ingredient costs, labor, and overall expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She noted that while the deal might draw diners back into the restaurant, it does not guarantee that franchisees will benefit financially, as about 95% of McDonald’s locations are franchise-owned. Franchisees are responsible for setting prices and managing costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchise owners often use promotions like the $5 meal deal to offset their overhead costs. Nevertheless, Spiegel highlighted that after accounting for expenses related to labor, packaging, condiments, delivery, and marketing, franchise owners might “basically wipe out any profit on any one or all of the items in the deal.”