McDonald’s may earn a profit from its $5 meal deal, although the profits are expected to be quite limited. According to restaurant analyst Mark Kalinowski, the profit margin for this combo meal is anticipated to be between 1% and 5%, translating to earnings of approximately $0.05 to $0.25 for each meal sold.
Kalinowski noted that this promotional deal is designed to attract inflation-weary customers back to the restaurant, with the hope that once there, they will purchase additional items beyond just the $5 meal. However, the company’s ability to generate profit from this deal will be influenced by various factors, including the costs of ingredients, labor, and overhead expenditures.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, remarked that the $5 meal deal is “more promotional than profitable.” She cautioned that while the offer might draw diners back to McDonald’s, it does not guarantee that franchise owners will see the corresponding profits.
With about 95% of McDonald’s locations operated by franchisees, these owners set their own prices and are responsible for managing additional costs such as rent, insurance, permits, and taxes. Joe Erlinger, president of McDonald’s U.S., noted in May that franchisees often pursue promotional offers like the $5 meal deal as a way to reduce these overhead expenses.
Spiegel emphasized that the deal serves as a “loss leader” aimed at attracting and retaining customers. After accounting for additional costs related to labor, packaging, condiments, delivery, and marketing, she indicated that franchise owners “essentially eliminate any profit on any one or all of the items in the deal.”