McDonald’s may generate some profit from its $5 meal deal, although the profit margins are expected to be quite modest. According to restaurant analyst Mark Kalinowski, the profit margin for this combo is projected to be between 1% and 5%, amounting to about $0.05 to $0.25 for each bundle sold.
Kalinowski noted that this promotional offer is an attempt by McDonald’s to attract inflation-weary consumers back to their locations, with the hope that once inside, customers will make additional purchases beyond the $5 deal.
However, overall profitability will hinge on various factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.”
She pointed out that while the combo could increase foot traffic, it won’t guarantee profits for franchise owners. Approximately 95% of McDonald’s locations are franchise-owned, meaning that individual franchisees set their own prices and manage costs such as rent, insurance, permits, and taxes.
In a statement from May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often launch promotional offers like the $5 meal deal to help offset those overhead costs. Nevertheless, Spiegel explained that the meal bundle essentially serves as a “loss leader” aimed at attracting customers. When additional expenses related to labor, packaging, condiments, delivery charges, and marketing are taken into account, franchise owners may find that they eliminate any potential profit from the items offered in the deal.