McDonald’s is expected to achieve a modest profit from its $5 meal deal, with margins estimated between 1% and 5%, equating to a profit of approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
This meal deal aims to attract consumers feeling the pinch of inflation, with the hope that customers will also purchase additional items once inside the restaurant. However, the overall profitability hinges on various factors, including ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates consulting firm, described the $5 meal deal as “more promotional than profitable.” She highlighted that, despite enticing diners back into McDonald’s, franchise owners might not benefit significantly from the proposed profits.
With around 95% of McDonald’s locations being franchisee-owned, these owners have the autonomy to set their own prices and manage various operational costs, including rent, insurance, permits, and taxes. Joe Erlinger, McDonald’s U.S. president, noted that franchisees often implement promotional offerings like the $5 meal deal to alleviate easier off those overheads.
However, Spiegel stated that once additional expenses related to labor, packaging, condiments, delivery, and marketing are taken into account, many franchise owners could end up losing money on the deal, effectively negating any profits from the bundled offering.