McDonald’s may manage to earn a profit from its $5 meal deal, but it is expected to be quite limited. According to restaurant analyst Mark Kalinowski, the profit margin on the combo is projected to be between 1% and 5%, translating to earnings of approximately $0.05 to $0.25 for each bundle sold.
Kalinowski suggests that this deal is part of McDonald’s strategy to attract inflation-burdened consumers back to its restaurants, with hopes that customers will purchase more than just the $5 meal. However, various additional factors, such as ingredient costs, labor, and overhead expenses, will affect the overall profitability.
Arlene Spiegel, president of Arlene Spiegel & Associates, labeled the $5 meal deal as “more promotional than profitable.” She noted that while the combo might draw diners back to McDonald’s, franchisees might not see the benefits of these profits.
Approximately 95% of McDonald’s locations are owned by franchisees, who set their own prices and manage expenses like rent, insurance, permits, and taxes. Joe Erlinger, president of McDonald’s U.S., mentioned in May that franchisees attempt to offset these overhead costs by offering promotional deals like the $5 meal.
However, Spiegel explained that the meal deal serves primarily as a “loss leader” designed to attract and retain customers. Once various costs—including labor, packaging, condiments, delivery charges, and marketing—are taken into account, franchise owners may find that they effectively eliminate any profits from the items included in the deal.