McDonald’s may generate only a modest profit from its new $5 meal deal, according to restaurant analyst Mark Kalinowski. The anticipated profit margin for the combo is estimated to be between 1% and 5%, translating to around $0.05 to $0.25 for each bundle sold.
Kalinowski notes that this promotion is part of McDonald’s strategy to attract inflation-weary consumers back into its restaurants, hoping they will purchase additional items beyond the $5 offering. However, the profitability of the deal is influenced by various factors, including costs related to ingredients, labor, and overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, emphasizes that the $5 meal deal is “more promotional than profitable.” She explains that while this initiative may bring customers into the restaurants, franchise owners, who operate about 95% of McDonald’s locations, have to manage their own pricing and are responsible for additional costs like rent, insurance, and taxes.
In previous comments, McDonald’s U.S. president Joe Erlinger highlighted that franchisees often implement promotional offers like the $5 deal to alleviate overhead costs. Nevertheless, Spiegel believes that the deal functions more as a “loss leader” designed to attract and retain customers. After accounting for extra costs, such as labor, packaging, and marketing, franchise owners might eliminate any potential profit from the meal deal.