McDonald’s stands to make a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to approximately $0.05 to $0.25 per combo sold, according to restaurant analyst Mark Kalinowski. The fast-food giant is aiming to attract price-sensitive consumers affected by inflation, encouraging them not only to purchase the meal deal but also to buy additional items.
However, profitability will be influenced by various factors including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, remarked that the $5 meal deal is “more promotional than profitable.” She noted that while the offer might drive traffic to the restaurants, it doesn’t guarantee profits for franchisees.
About 95% of McDonald’s locations are owned by franchisees, which means they manage their own pricing and handle various costs such as rent, insurance, permits, and taxes. In May, Joe Erlinger, president of McDonald’s U.S., indicated that franchisees often attempt to offset these overhead costs through promotional campaigns like the $5 meal deal.
Nevertheless, Spiegel indicated that the deal primarily serves as a “loss leader” to attract and retain customers. When considering additional costs associated with labor, packaging, condiments, delivery, and marketing, she pointed out that owners may find any profit from the individual items in the deal significantly diminished.