McDonald’s anticipates a modest profit from its recently introduced $5 meal deal, generating a profit margin between 1% and 5%, translating to around $0.05 to $0.25 for each combo sold, as noted by restaurant analyst Mark Kalinowski.
This promotion aims to attract inflation-weary consumers back into the restaurant, encouraging them to purchase additional items beyond the $5 offer.
However, the profitability of the meal deal hinges on various factors, including ingredient costs, labor, and other operational expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She emphasized that while the deal may draw customers back to the establishment, franchise owners may not benefit directly from the profits.
Approximately 95% of McDonald’s locations are franchised, meaning individual owners establish their own pricing strategies and bear additional costs such as rent, insurance, permits, and taxes.
In comments made in May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often implement promotional offers like the $5 meal deal to cope with overhead expenses.
Despite this strategy, Spiegel referred to the meal deal as a “loss leader” intended to attract and re-attract customers. She pointed out that once labor, packaging, condiments, delivery fees, and marketing expenses are considered, franchise owners often eliminate any potential profit from the items included in the deal.