McDonald’s is expected to generate only a modest profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%. This translates to roughly $0.05 to $0.25 earned for each combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the deal aims to entice consumers who are feeling the effects of inflation to return to the restaurant, with the hope that they will purchase more than just the $5 meal. However, profitability will hinge on various factors including ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, emphasized that the deal is more about promotion than profit. Even if the meal deal successfully draws diners in, it’s unclear if franchisees will benefit from increased sales, as approximately 95% of McDonald’s locations are franchise-owned. Franchise owners set their own prices and bear various costs like 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 manage overhead costs. However, Spiegel referred to the combo as a “loss leader” intended to attract and retain customers. Once labor, packaging, condiments, delivery expenses, and marketing costs are accounted for, she noted that franchise owners may see little to no profit from the items included in the deal.