McDonald’s is poised to profit from its $5 meal deal, although the returns are expected to be modest. According to restaurant analyst Mark Kalinowski, the fast-food chain’s profit margin on this combo meal is estimated to be between 1% and 5%, translating to roughly $0.05 to $0.25 per bundle sold.
Kalinowski explained that this deal is part of McDonald’s strategy to attract customers who are feeling the pinch of inflation. The hope is that once customers enter the restaurant for the $5 offering, they will be tempted to purchase additional items.
However, profitability hinges on various factors such as ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She noted that even if the offering successfully draws customers back, franchise owners may not share in the profits.
With approximately 95% of McDonald’s locations being franchisee owned, each owner sets their own prices and also incurs additional costs, including rent, insurance, permits, and taxes. Joe Erlinger, McDonald’s U.S. president, indicated in May that franchisees often implement promotional offers like the $5 meal deal to help offset their overhead.
Despite its promotional advantages, Spiegel argued that the meal bundle may act more as a “loss leader” intended to attract customers rather than generate significant profit. When considering the extra expenses related to labor, packaging, condiments, delivery, and marketing, she stated that owners effectively erase any profits from the items sold in the deal.