McDonald’s may generate some profit from its $5 meal deal, but the returns are expected to be modest. According to restaurant analyst Mark Kalinowski, the profit margin on this combo could range from 1% to 5%, translating to approximately $0.05 to $0.25 for each meal sold.
Kalinowski noted that this deal is part of McDonald’s strategy to attract consumers who are feeling the weight of inflation, with hopes that once customers come in for the $5 offering, they will also purchase additional items.
However, the overall profitability of this meal deal will rely on several factors, including the costs of ingredients, labor, and other overhead expenses. Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, emphasized that the $5 meal deal is more aimed at promotion than profit.
It’s important to note that the majority of McDonald’s locations, approximately 95%, are franchisee-owned. This means that individual owners set their own prices and must manage various costs, including rent, insurance, permits, and taxes. In May, McDonald’s U.S. president Joe Erlinger indicated that franchisees often use promotional offers, such as the $5 meal deal, as a strategy to offset these overhead costs.
Nevertheless, Spiegel remarked that the bundle functions primarily as a “loss leader” intended to attract and retain customers. After accounting for labor, packaging, condiments, delivery fees, and marketing expenses, she stated that franchise owners may ultimately eliminate any potential profit from the items included in the deal.