McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins projected between 1% and 5%, translating to earnings of $0.05 to $0.25 for each combo sold. According to restaurant analyst Mark Kalinowski, this strategy aims to entice consumers, who are currently grappling with inflation, back into the restaurant, with the hope that they will purchase additional items beyond the meal deal.
However, factors such as ingredient costs, labor, and overhead expenses will significantly influence profitability. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She noted that while the deal may draw customers into the restaurants, it doesn’t guarantee profits for franchise owners.
Approximately 95% of McDonald’s locations are franchised, meaning franchisees have control over pricing and must manage various expenses including rent, insurance, permits, and taxes. In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often use promotional offerings like the $5 meal deal to offset these higher costs.
Spiegel emphasized that the bundle serves primarily as a “loss leader” to attract and retain customers. She pointed out that once labor, packaging, condiments, delivery fees, and marketing costs are taken into account, franchise owners often find that profits from the combined items are negligible or non-existent.