McDonald’s is expected to generate a slight profit from its $5 meal deal, although the margins will be modest. According to restaurant analyst Mark Kalinowski, the profit margin for this combo meal is anticipated to range between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski indicated that this meal deal is part of McDonald’s strategy to attract price-sensitive consumers who are feeling the pinch of inflation. The goal is to entice these customers to enter the restaurant and potentially purchase additional items beyond the $5 deal.
However, profitability will hinge on various factors such as the rising costs of ingredients, labor, and general overhead expenses. Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
While the deal may succeed in drawing customers back to the restaurant, there is no guarantee that franchise owners will see corresponding profits. Approximately 95% of McDonald’s locations are franchise-owned, meaning that individual owners determine their pricing and absorb various extra costs, including rent, insurance, permits, and taxes.
In a statement from May, McDonald’s U.S. president Joe Erlinger noted that franchisees often resort to promotional offerings like the $5 meal deal to help offset these overhead costs. Despite these efforts, Spiegel warned that the meal deal effectively functions as a “loss leader,” aimed at attracting and retaining customers. After accounting for additional expenses related to labor, packaging, condiments, delivery, and marketing, franchise owners may find that any potential profit from this deal is largely erased.