McDonald’s is anticipated to generate a modest profit from its $5 meal deal, with profit margins expected to range from 1% to 5%, translating to gains of approximately $0.05 to $0.25 per combo sold, according to restaurant analyst Mark Kalinowski.
This meal deal is part of McDonald’s strategy to attract inflation-weary customers back into its restaurants, with the hope that once they enter, they will make additional purchases beyond the $5 offer.
However, the potential for profit is contingent on various factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, remarked that the $5 meal deal is “more promotional than profitable.”
Even if the deal successfully draws customers, it may not ensure that franchise owners will see the profits, as approximately 95% of McDonald’s outlets are franchisee-owned. This means the franchisees set their own prices and bear additional expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, noted that franchisees often implement promotional offers like the $5 meal deal to help offset these overhead costs. However, Spiegel pointed out that the deal serves primarily as a “loss leader” aimed at attracting and retaining customers. Once the added costs of labor, packaging, condiments, delivery, and marketing are considered, franchise owners may find that they are left with little to no profit from the items included in the bundle.