McDonald’s is expected to see 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 bundle sold, as reported by restaurant analyst Mark Kalinowski.
Kalinowski indicated that this meal deal is part of McDonald’s strategy to attract inflation-affected consumers back to their locations, with the hope that these customers will make additional purchases beyond the $5 offering.
Profitability will be influenced by various factors, including the costs associated with ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is predominantly a promotional strategy rather than a significant profit generator.
Although the combo may entice customers to return, franchise owners may not experience these profits directly since nearly 95% of McDonald’s locations are franchise-operated. Franchisees have the autonomy to set prices and manage their own expenses, which include rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees often use promotional pricing to offset overhead costs. Nevertheless, Spiegel stated that the meal deal essentially serves as a “loss leader” aimed at attracting and retaining customers. When considering the additional costs associated with labor, packaging, condiments, delivery, and marketing, franchise owners may find that potential profits from the meal deal are minimal or non-existent.