McDonald’s $5 meal deal may lead to a slight profit for the fast food giant, but analysts suggest the margins will be narrow. Restaurant analyst Mark Kalinowski estimates the profit margin on the combo could range between 1% and 5%, translating to about $0.05 to $0.25 per meal sold.
According to Kalinowski, this promotional deal is intended to entice consumers who are feeling the pinch of inflation to return to McDonald’s. The strategy aims to encourage these customers to spend beyond the $5 offer once they are inside the restaurant.
However, the profitability of the $5 meal deal will hinge on various factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, emphasized that the deal is more focused on promotion rather than profit. She noted that while the offer may draw customers back, franchise owners might not see significant profits from it.
Approximately 95% of McDonald’s locations are franchisee-owned, meaning that individual owners determine pricing and bear additional costs like rent, insurance, permits, and taxes. McDonald’s U.S. president Joe Erlinger mentioned in May that franchisees usually implement promotional strategies like the $5 meal deal to manage their expenses.
However, Spiegel cautioned that due to the various costs associated with labor, packaging, condiments, delivery, and marketing, franchise owners may find that any potential profit from the deal is effectively eliminated.