McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, equating to approximately $0.05 to $0.25 per meal sold, according to restaurant analyst Mark Kalinowski.
This initiative aims to attract customers who are feeling the pinch from inflation, encouraging them to make additional purchases beyond the $5 combo. However, the profitability of this deal will depend on various factors, including ingredient prices, labor costs, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, noted that while the meal deal serves more as a promotional tool than a significant profit generator, its impact on franchisees’ profits can vary. With around 95% of McDonald’s locations being franchise-operated, individual franchise owners set their own prices and must manage additional expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often implement promotional offers like the $5 meal deal to help mitigate overhead costs. Nevertheless, Spiegel characterized the combo as a “loss leader” intended to attract and retain customers. After accounting for the costs associated with labor, packaging, condiments, delivery, and marketing, she indicated that franchise owners might effectively eliminate any profit from the items included in the deal.