McDonald’s may find a small profit from its $5 meal deal, but the profit margin is expected to be modest. Restaurant analyst Mark Kalinowski estimates that the profit per combo sold could range from 1% to 5%, amounting to approximately $0.05 to $0.25 per bundle.
Kalinowski notes that the $5 deal is a strategy to attract inflation-weary customers back to the restaurant, hoping that once inside, they will purchase additional items beyond the meal deal.
However, profitability is influenced by various factors, including ingredient costs, labor expenses, and overhead costs. Arlene Spiegel, president of Arlene Spiegel & Associates, described the meal deal as “more promotional than profitable.”
Despite the potential to draw customers back into the restaurant, franchisees might not benefit significantly from the profits, as approximately 95% of McDonald’s locations are franchise-owned. This means franchise owners manage their own pricing and must deal with various costs like rent, insurance, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., stated that franchisees implement promotional offers like the $5 meal deal to help offset overhead costs. Nevertheless, Spiegel indicated that the deal primarily serves as a “loss leader” aimed at attracting and retaining customers. Once the expenses for labor, packaging, condiments, delivery, and marketing are considered, franchise owners may essentially eliminate any profit from the items included in the deal.