McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%. This translates to profits of approximately $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski mentioned that the deal is part of McDonald’s strategy to attract consumers affected by inflation, aiming to encourage them to purchase additional items beyond the $5 meal. However, profitability will be influenced by factors such as the costs of ingredients, labor, and other overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She explained that while the combo may draw customers back to the restaurant, it doesn’t guarantee that franchise owners will reap the rewards.
With approximately 95% of McDonald’s locations being franchisee-owned, these owners set their own prices and bear various costs, including rent, insurance, permits, and taxes. Joe Erlinger, president of McDonald’s U.S., noted in May that franchisees utilize promotional offers like the $5 meal deal to help manage overhead expenses.
Despite this strategy, Spiegel categorized the meal deal as a “loss leader” meant to attract and retain customers. When accounting for the additional costs of labor, packaging, condiments, delivery, and marketing, many franchise owners may find that they eliminate any potential profits from the deal.