McDonald’s is poised to generate some profit from its $5 meal deal, but the earnings will be modest. Analyst Mark Kalinowski estimates that the profit margin on the combo will be between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski noted that this deal is part of McDonald’s strategy to attract inflation-burdened consumers back to the restaurant, encouraging them to order more than just the $5 meal. However, the potential profitability depends on several factors, such as ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, remarked that the $5 meal deal is “more promotional than profitable.” Although it may draw customers back into McDonald’s, franchise owners may not necessarily benefit from the profits.
Approximately 95% of McDonald’s locations are franchise-owned, meaning those owners determine their own pricing and must also manage additional costs, including rent, insurance, permits, and taxes. In a statement from May, McDonald’s U.S. president Joe Erlinger explained that franchisees implement promotional offers like the $5 meal deal to alleviate overhead costs.
Despite this, Spiegel described the meal deal as a “loss leader” aimed at attracting and retaining customers. When considering additional expenses related to labor, packaging, condiments, delivery, and marketing, she noted that franchise owners might ultimately eliminate any profits on the items included in the deal.