McDonald’s may derive a profit from its $5 meal deal, although it is expected to be quite modest. According to restaurant analyst Mark Kalinowski, the profit margin on this combo could range from 1% to 5%, translating to approximately $0.05 to $0.25 for each meal sold.
Kalinowski noted that this offering represents McDonald’s strategy to lure inflation-weary customers back into their restaurants, with hopes that once inside, they might purchase more than just the $5 deal.
However, actual profitability will hinge on several factors, including the cost of ingredients, labor, and other overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.”
Moreover, while this combo may entice diners to return, the benefits may not extend to franchisees. About 95% of McDonald’s locations are franchise-owned, meaning each owner sets their own prices and absorbs various costs like rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees often attempt to reduce these overhead costs through promotional offers, including the $5 meal deal. However, Spiegel indicated that this deal serves more as a “loss leader to capture and re-capture guests.” Once the additional expenses related to labor, packaging, condiments, delivery, and marketing are considered, franchise owners often find that any potential profit from the items in the deal is essentially erased.