McDonald’s may generate a profit from its $5 meal deal, though the gains are expected to be modest. According to restaurant analyst Mark Kalinowski, the profit margin on this combination meal is anticipated to range between 1% and 5%, resulting in earnings of approximately $0.05 to $0.25 for each package sold.
Kalinowski noted that this offer is part of McDonald’s strategy to attract inflation-weary consumers back to their restaurants, with hopes that customers will purchase additional items once inside.
However, profitability will also hinge on various factors, such as the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, emphasized that the $5 meal deal is “more promotional than profitable.”
While the deal may succeed in drawing diners back, it doesn’t guarantee that franchise owners will enjoy the ensuing profits. Approximately 95% of McDonald’s locations are franchise-owned, meaning that individual owners set their own pricing and must manage additional costs like rent, insurance, permits, and taxes.
In a recent statement, Joe Erlinger, McDonald’s U.S. president, explained that franchisees often attempt to offset these overhead costs through promotional strategies, including the $5 meal deal. Nonetheless, Spiegel described the bundle as primarily a “loss leader” designed to attract and retain customers. After accounting for expenses related to labor, packaging, condiments, delivery, and marketing, she indicated that owners could effectively eliminate any profit associated with the items in this deal.