McDonald’s is anticipated to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
This meal deal aims to attract consumers who are feeling the pressure of inflation, encouraging them to return to the restaurant and potentially make additional purchases beyond the $5 offer.
However, the profitability of this deal hinges on various factors, including the costs of ingredients, labor, and overhead expenses. As Arlene Spiegel, president of Arlene Spiegel & Associates, noted, the $5 meal deal is viewed more as a promotional strategy than a profitable venture.
Moreover, while the combo may entice diners back into McDonald’s, there is no guarantee that franchisees will benefit financially from the increased foot traffic. With around 95% of McDonald’s locations owned by franchisees, each owner sets their own prices and faces additional expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often utilize promotional offers like the $5 meal deal to offset their overhead costs. Nevertheless, Spiegel emphasized that the bundle effectively serves as a “loss leader” designed to attract and retain customers. Once the extensive costs associated with labor, packaging, condiments, delivery, and marketing are considered, franchisees often find that they eliminate any potential profit associated with the menu items included in the deal.