McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to about $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
This meal deal is part of McDonald’s strategy to attract inflation-weary customers back into their restaurants, with the hope that they will purchase additional items beyond the $5 offer. However, the overall profitability of the meal deal will depend on various factors such as ingredient costs, labor expenses, and overhead.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as being “more promotional than profitable.” She noted that even if the deal successfully entices customers into the restaurant, franchisees may not directly benefit from such promotions. Approximately 95% of McDonald’s locations are franchisee-owned, meaning these owners are responsible for setting their own prices and covering additional expenses like rent, insurance, and taxes.
Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees utilize promotional offers like the $5 meal deal to manage overhead costs. Despite this, Spiegel referred to the bundle as a “loss leader” aimed at attracting and retaining customers. Once all associated costs—such as labor, packaging, delivery, and marketing—are taken into account, franchise owners may find that they essentially eliminate any potential profits from the items included in the deal.