McDonald’s is expected to generate a profit from its $5 meal deal, though it will be modest. According to restaurant analyst Mark Kalinowski, the profit margin for this combo meal is estimated to be between 1% and 5%, translating to approximately $0.05 to $0.25 per bundle sold.
Kalinowski notes that this promotion is part of McDonald’s strategy to attract consumers who are feeling the effects of inflation. The company hopes to entice these customers to purchase additional items beyond the $5 offering.
However, the potential for profit is contingent on various factors, including the costs of ingredients, labor, and other overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She emphasized that although the deal may draw customers back into the restaurant, franchise owners may not see the benefits directly.
With roughly 95% of McDonald’s locations being franchise-owned, these owners set their own prices and must manage additional costs, such as rent, insurance, permits, and taxes. Earlier this year, Joe Erlinger, McDonald’s U.S. president, acknowledged that franchisees aim to offset these overheads by offering promotions like the $5 meal deal.
Spiegel explained that the combo meal acts as a “loss leader” intended to attract and retain customers. Once expenses related to labor, packaging, condiments, delivery, and marketing are taken into account, she asserted that franchise owners often find their profits eroded or eliminated for all items in the promotion.