McDonald’s is expected to earn a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, amounting to approximately $0.05 to $0.25 for each combo sold, as per restaurant analyst Mark Kalinowski.
This meal deal is part of McDonald’s strategy to attract customers feeling the pinch of inflation, encouraging them to make additional purchases beyond the $5 offer. However, the profitability of the deal hinges on various factors, including ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, stated that the $5 meal deal primarily serves as a promotion rather than a significant profit generator. She noted that while the promotion may draw customers back into the restaurants, it does not guarantee profits for franchise owners.
With around 95% of McDonald’s locations operated by franchisees, individual owners must determine their pricing and manage essential costs such as rent, insurance, permits, and taxes. Joe Erlinger, president of McDonald’s U.S., highlighted in May that franchise owners often deploy promotional offers like the $5 meal deal to help mitigate these overhead expenses.
Spiegel further explained that after accounting for labor, packaging, condiments, delivery charges, and marketing costs, franchises typically end up eliminating any potential profit from the items included in the deal.