McDonald’s is expected to make a modest profit from its $5 meal deal, with profit margins projected between 1% and 5%, translating to approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski mentioned that this promotion aims to attract consumers who are grappling with inflation, encouraging them to enter the restaurant and potentially purchase additional items beyond the $5 offer. However, profitability is contingent on factors such as the costs of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She pointed out that while the promotion may bring customers back to McDonald’s, franchise owners, who own about 95% of the locations, may not benefit significantly from the profits. Franchisees have the freedom to set their own prices, but they must also manage numerous expenses, including rent, insurance, permits, and taxes.
In a statement from May, McDonald’s U.S. president Joe Erlinger noted that franchisees utilize promotional deals like the $5 meal to manage these overhead costs. Nonetheless, Spiegel emphasized that the deal functions as a “loss leader,” designed to attract and retain customers. When additional expenses related to labor, packaging, condiments, delivery, and marketing are taken into account, owners often find that these costs significantly diminish or completely eliminate any profit from the meal deal.