McDonald’s is expected to earn a limited profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to roughly $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this promotion aims to attract inflation-weary consumers back into the restaurant, encouraging them to purchase more than just the $5 meal. However, the potential for profitability is influenced by factors such as ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as being “more promotional than profitable.” Even if the combo succeeds in drawing customers, franchise owners may not directly benefit from the profits, as around 95% of McDonald’s locations are franchisee-owned. These franchisees set their own prices and must manage additional expenses like rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees often utilize promotional offers, like the $5 meal deal, to help offset rising overhead costs. Spiegel characterized the deal as a “loss leader” designed to attract and retain customers. When accounting for extra costs associated with labor, packaging, condiments, delivery, and marketing, she asserted that franchise owners may effectively eliminate any potential profit from the deal altogether.