McDonald’s is expected to make a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to about $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
This meal deal aims to attract cost-conscious consumers dealing with inflation, encouraging them to enter the restaurant and potentially purchase additional items beyond the $5 combo. However, profitability will be influenced by various factors, including the costs of ingredients, labor, and other operational expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She noted that while the combo may draw customers, franchise owners, who comprise approximately 95% of McDonald’s locations, might not see significant profits. Franchisees set their own pricing and must manage extra costs such as rent, insurance, permits, and taxes.
Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often run promotional deals to offset these overhead expenses. Nonetheless, Spiegel indicated that the meal deal serves primarily as a “loss leader” aimed at attracting and retaining customers. When factoring in additional costs related to labor, packaging, condiments, delivery, and marketing, franchise owners may effectively eliminate any potential profit from the items included in the bundle.