McDonald’s is anticipated to generate a modest profit from its $5 meal deal, with profit margins likely between 1% and 5%, equating to approximately $0.05 to $0.25 per combo sold, as explained by restaurant analyst Mark Kalinowski.
This promotional strategy is intended to attract consumers feeling the pinch of inflation, encouraging them to make additional purchases beyond the $5 offer. However, profitability hinges on various factors, including the costs of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.” Although the deal may bring customers back, it doesn’t guarantee that franchisees will benefit financially. Since approximately 95% of McDonald’s locations are franchise-operated, owners establish their own pricing structures and must manage additional expenses like rent, insurance, permits, and taxes.
Joe Erlinger, U.S. president of McDonald’s, mentioned in May that franchisees often implement promotional offers to reduce their overhead costs. Nevertheless, Spiegel referred to the bundle as primarily a “loss leader” aimed at attracting and retaining customers. When accounting for the extra costs associated with labor, packaging, condiments, delivery, and marketing, franchise owners may find that they eliminate any potential profits from the items included in the deal.