McDonald’s may see a modest profit from its $5 meal deal, with analysts estimating profit margins between 1% and 5%. This translates to earnings of approximately $0.05 to $0.25 per combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the meal deal is a strategy to attract consumers who are feeling the pinch of inflation. The hope is that once customers enter the restaurant for the $5 offering, they will be encouraged to purchase additional items.
However, the profitability of the deal is contingent on several factors, including the rising costs of ingredients, labor, and operational expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the meal deal as being “more promotional than profitable.”
Although the combo may draw diners back into restaurants, it may not guarantee profits for franchise owners. Approximately 95% of McDonald’s locations are franchise-operated, which means these owners set their own pricing and must manage various costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, the U.S. president of McDonald’s, mentioned that franchisees often implement promotional offers like the $5 meal deal to offset their overhead costs. Nevertheless, Spiegel emphasized that the bundle primarily serves as a “loss leader,” aimed at attracting and retaining customers. When considering the extra costs for labor, packaging, condiments, delivery, and marketing, owners may effectively eliminate any potential profit from the deal.