McDonald’s may see a slight profit from its $5 meal deal, but the margin is expected to be quite modest. According to restaurant analyst Mark Kalinowski, the profit margin on this combo meal is likely to range between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski notes that this initiative aims to attract consumers who are feeling the pressure of inflation, encouraging them to enter the restaurant and potentially purchase additional items beyond the $5 meal.
However, the profitability of this deal hinges on various factors, including the cost of ingredients, labor, and other operational expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, describes the $5 meal deal as “more promotional than profitable.”
While the meal might bring customers back, it does not necessarily guarantee that franchise owners will see those profits. About 95% of McDonald’s locations are franchise-operated, meaning the franchisees set their own prices and manage several additional costs, such as rent, insurance, permits, and taxes.
In May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often counteract their overhead expenses by implementing promotional deals like the $5 meal. Nonetheless, Spiegel pointed out that the deal functions more like a “loss leader” to attract customers. After accounting for the costs associated with labor, packaging, condiments, delivery, and marketing, franchise owners may find that any potential profit from the meal deal is essentially negated.