McDonald’s has the potential to earn a profit from its $5 meal deal, albeit a modest one. According to restaurant analyst Mark Kalinowski, the profit margin for this combo meal is expected to range between 1% and 5%, translating to approximately $0.05 to $0.25 per meal sold.
This promotional offer is part of McDonald’s strategy to attract customers who are grappling with inflation, with the hope that once they are inside the restaurant, they will purchase more items beyond the $5 deal.
However, the profitability of the meal deal is contingent on several factors, including the costs associated with ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.”
Despite the potential for drawing diners back into restaurants, franchise owners may not benefit from these profits. Approximately 95% of McDonald’s establishments are franchise-owned, meaning that individual owners set their own prices and must accommodate added expenses such as rent, insurance, permits, and taxes.
In a statement made in May, McDonald’s U.S. president Joe Erlinger noted that franchisees often implement promotional deals like the $5 meal to help offset those overhead costs. Nonetheless, Spiegel emphasized that this meal deal essentially serves as a “loss leader” aimed at attracting and retaining customers.
Taking into account various extra costs such as labor, packaging, condiments, delivery fees, and marketing, she stated that franchise owners might end up eliminating any profit from the items included in the deal.