McDonald’s is expected to turn a modest profit from its $5 meal deal, with profit margins projected to be between 1% and 5%. This translates to about $0.05 to $0.25 earned for each combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the deal aims to attract inflation-weary customers back to the restaurant, encouraging them to purchase more items beyond the $5 offering. However, the overall profitability will hinge on various factors, including the cost of ingredients, labor, and other overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She emphasized that while the combo could draw diners back in, franchise owners may not benefit significantly from these sales.
With approximately 95% of McDonald’s locations being franchise-operated, individual owners have the autonomy to set their prices and face various expenses, including rent, insurance, permits, and taxes.
In a statement from May, Joe Erlinger, McDonald’s U.S. president, highlighted that franchisees employ promotional offers like the $5 meal deal as a strategy to counteract overhead costs. Nevertheless, Spiegel described the meal bundle as primarily a “loss leader to capture and re-capture guests.” She cautioned that once added costs such as labor, packaging, condiments, delivery charges, and marketing are taken into account, franchise owners might eliminate any potential profit from the deal.