McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins projected to range between 1% and 5%, translating to approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
This initiative aims to attract consumers who are struggling with inflation, hoping that once they enter locations, they will make additional purchases beyond the $5 deal. However, the ability to make a profit will also hinge on several factors, including fluctuating ingredient costs, labor expenses, and overhead.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, characterized the $5 meal deal as more of a promotional strategy rather than a significant revenue generator. While the combo may bring diners back to restaurants, franchisees may not necessarily see increased profits.
With approximately 95% of McDonald’s locations owned by franchisees, these owners independently set their prices while managing extra costs such as rent, insurance, and taxes. In May, Joe Erlinger, president of McDonald’s U.S., noted that franchisees try to offset overheads by implementing promotional deals like the $5 meal.
Nevertheless, Spiegel emphasized that these bundles can serve as “loss leaders” aimed at attracting and re-engaging customers. After accounting for additional costs related to labor, packaging, condiments, delivery, and marketing, she indicated that franchise owners often end up eliminating any potential profit from the items in the deal.