McDonald’s may achieve a profit from its $5 meal deal, but the margins will be modest. According to restaurant analyst Mark Kalinowski, the profit margin for this combo is expected to be between 1% and 5%, translating to about $0.05 to $0.25 for each bundle sold.
Kalinowski noted that this offering is part of McDonald’s strategy to attract consumers who are feeling the pinch of inflation, encouraging them to make additional purchases beyond the $5 meal. However, profitability will depend on various factors such as ingredient costs, labor expenses, and overhead.
Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.” She explained that while the deal may draw customers back to the restaurant, franchise owners may not see significant profits from it.
Approximately 95% of McDonald’s locations are owned by franchisees, who determine their own pricing and need to cover additional costs such as rent, insurance, permits, and taxes. In May, Joe Erlinger, the president of McDonald’s U.S., stated that franchisees attempt to lower these overhead expenses by offering promotions like the $5 meal deal.
Despite these efforts, Spiegel referred to the deal as a “loss leader,” aimed at attracting and retaining customers. Once other expenses like labor, packaging, condiments, delivery, and marketing are considered, franchise owners may effectively eliminate any profit from the deal.