McDonald’s anticipates a modest profit from its $5 meal deal, with profit margins expected to range between 1% and 5%, translating to approximately $0.05 to $0.25 for each combo sold, as noted by restaurant analyst Mark Kalinowski.
Kalinowski indicated that this initiative aims to attract consumer foot traffic, particularly amid inflation, encouraging them to purchase additional items beyond the $5 offering.
However, actual profitability will hinge on various factors, including the cost of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the meal deal as “more promotional than profitable.”
While the promotion might enhance customer visitation, it is unlikely that franchisees will benefit from these profits. Approximately 95% of McDonald’s locations are franchise-owned, allowing these owners to set their own prices and manage additional expenses like rent, insurance, and taxes.
In a statement from May, McDonald’s U.S. President Joe Erlinger mentioned that franchisees often implement promotional deals, such as the $5 meal, to offset overhead costs. However, Spiegel noted that the bundle serves more as a “loss leader to capture and re-capture guests.” Once factors like labor, packaging, condiments, delivery fees, and marketing costs are included, franchise owners might find that they effectively eliminate any profit from the bundled offer.