McDonald’s is expected to generate a modest profit from its $5 meal deal, with margins anticipated to range between 1% and 5%, translating to earnings of approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
This meal offer aims to attract inflation-weary consumers back to the restaurant, with the strategy being that once customers enter, they will be inclined to make additional purchases beyond the $5 meal. Nonetheless, the profitability of this deal depends on various factors, including the cost of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, noted that the $5 meal deal is more focused on promotion rather than generating significant profit. Although the combo is expected to draw diners back, it may not result in profits for franchisees, who own about 95% of McDonald’s locations. Franchise owners determine their own pricing and must manage additional operational costs, such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, President of McDonald’s U.S., mentioned that franchisees often implement promotional strategies like the $5 meal deal to help reduce these overhead expenses. However, with costs for labor, packaging, condiments, delivery, and marketing factored in, Spiegel indicated that franchise owners could end up eliminating any profit from the meal deal entirely.