McDonald’s may earn a slight profit from its $5 meal deal, but it is expected to be modest. The fast-food giant is currently facing its first lawsuit related to the E. coli outbreak linked to its Quarter Pounder.
According to restaurant analyst Mark Kalinowski, the profit margin on the $5 combo could be between 1% and 5%, translating to approximately $0.05 to $0.25 earned per meal sold. Kalinowski noted that this initiative aims to attract inflation-weary consumers back to the restaurant, with hopes that once they visit, they will purchase additional items beyond the $5 offering.
However, profitability will hinge on various factors, including the prices of ingredients, labor, and operational expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the meal deal as “more promotional than profitable.”
Furthermore, even if the promotion drives traffic to the restaurants, franchise owners may not necessarily benefit from the profits. About 95% of McDonald’s locations are franchise-owned, meaning that owners have the authority to set their own prices and are responsible for additional expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., remarked that franchisees often implement promotional offers like the $5 meal deal to help manage overhead costs. Nevertheless, Spiegel referred to the bundle as more of a “loss leader” intended to attract and retain customers. She explained that when accounting for labor, packaging, condiments, delivery fees, and marketing expenses, franchise owners could effectively eliminate any profit from the items included in the deal.