McDonald’s may generate a modest profit from its $5 meal deal, with profit margins expected to range between 1% and 5%, equating to approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the promotion aims to attract inflation-weary consumers back to the restaurant, with the hope that once they are there, they will make additional purchases beyond the $5 offer.
However, the profitability of the deal will hinge on several factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal as “more promotional than profitable.”
Furthermore, while the deal may bring customers back into McDonald’s, it does not guarantee profits for franchisees. Approximately 95% of McDonald’s locations are franchise-owned, meaning individual owners determine their prices and must manage additional expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., indicated that franchisees often employ promotional offers, like the $5 meal deal, to alleviate overhead costs. However, Spiegel remarked that the bundle functions primarily as a “loss leader to capture and re-capture guests.” After considering the costs related to labor, packaging, condiments, delivery, and marketing, she explained, franchise owners essentially eliminate any potential profit from the items in the deal.