McDonald’s is anticipated to achieve a modest profit from its $5 meal deal, with profit margins expected to range between 1% and 5%. This translates to approximately $0.05 to $0.25 gained for each meal sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this offer aims to attract inflation-weary consumers back to the restaurant, encouraging them to purchase additional items beyond the $5 combo.
The profitability of this deal hinges on various factors, including the costs associated with ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Even if the deal successfully lures customers back, it may not guarantee profits for franchisees, who own about 95% of McDonald’s outlets. These owners set their own pricing and are responsible for managing increased costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees implement promotional offers like the $5 meal to help offset overhead expenses. However, Spiegel emphasized that the bundle functions more as a “loss leader” aimed at gaining and retaining customers.
Once additional costs, including labor, packaging, condiments, delivery charges, and marketing, are taken into account, she clarified that the franchise owners may effectively eliminate any potential profit from the meal deal.