McDonald’s may see a modest profit from its $5 meal deal, estimated at a margin between 1% and 5%, translating to about $0.05 to $0.25 per combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the deal aims to attract inflation-weary customers to the restaurants, with the hope that once they arrive, they will purchase more items beyond the $5 offering.
However, profitability will be influenced by various factors, including ingredient prices, labor costs, and other overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
She added that even if the combo succeeds in bringing customers back, it does not guarantee profit for franchisees. Approximately 95% of McDonald’s locations are franchise-owned, meaning individual owners set their own prices and manage additional expenses like rent, insurance, permits, and taxes.
In May, Joe Erlinger, President of McDonald’s U.S., mentioned that franchisees often use promotional deals like the $5 meal to offset overhead costs. Nevertheless, Spiegel pointed out that the bundle operates as a “loss leader” to attract customers. After factoring in the costs of labor, packaging, condiments, delivery, and marketing, she concluded that owners may end up erasing any potential profit from the deal.