McDonald’s could see modest profits from its $5 meal deal, with profit margins estimated between 1% and 5%, equating to approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
This promotional offering is part of McDonald’s strategy to attract inflation-weary consumers back to its restaurants, with the hopes that once customers are inside, they will make additional purchases beyond the $5 deal.
However, the actual profitability will hinge on various factors, including the costs for ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the meal deal is “more promotional than profitable.”
Even if the deal succeeds in drawing customers back, franchise owners might not benefit directly. About 95% of McDonald’s locations are franchisee-owned, meaning these owners set their own prices while managing additional costs such as rent, insurance, permits, and taxes.
Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees often use promotional offers like the $5 meal to manage their overhead costs. However, Spiegel emphasized that this combo acts more as a “loss leader to capture and re-capture guests.” Once factors like labor costs, packaging, condiments, delivery fees, and marketing are taken into account, owners might “wipe out any profit on any one or all of the items in the deal.”