McDonald’s aims to profit from its $5 meal deal, though analysts predict the margins will be modest. According to restaurant analyst Mark Kalinowski, the profit margin for this combo meal is estimated to be between 1% and 5%, equating to approximately $0.05 to $0.25 per meal sold.
Kalinowski noted that the $5 meal deal is a strategy for McDonald’s to attract consumers who are feeling the pinch of inflation. The goal is not only to bring customers in but also to encourage them to purchase additional items beyond the meal deal.
However, the actual profitability of the meal deal depends on various factors, including the costs of ingredients, labor, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, emphasized that the $5 offering is “more promotional than profitable.”
Spiegel pointed out that while the combo may draw diners back to the restaurant, franchisees may not reap significant benefits. Approximately 95% of McDonald’s locations are franchisee-owned, meaning that individual owners set their own prices and manage additional expenses such as rent, insurance, permits, and taxes.
In May, McDonald’s U.S. president Joe Erlinger indicated that franchisees often implement promotional deals like the $5 meal to help offset overhead costs. However, Spiegel described the bundle as a “loss leader” aimed at attracting and retaining customers. She explained that after considering additional costs related to labor, packaging, condiments, delivery, and marketing, franchise owners might find themselves with little to no profit on any of the items included in the deal.