McDonald’s may generate a profit from its $5 meal deal, but it will be minimal. Restaurant analyst Mark Kalinowski estimates that the profit margin for this combo meal will range from 1% to 5%, translating to a profit of approximately $0.05 to $0.25 for each bundle sold.
Kalinowski noted that this meal deal is part of McDonald’s strategy to attract price-sensitive consumers amid inflation, with the hope that customers will purchase additional items while in the restaurant.
However, the overall profitability of the deal hinges on several variables, including ingredient costs, labor expenses, and general overhead. Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
She further explained that even if the meal deal successfully draws customers in, it does not guarantee profits for franchisees. Approximately 95% of McDonald’s locations are franchisee-operated, meaning that individual owners determine their own pricing and bear the burden of extra costs like rent, insurance, permits, and taxes.
In a previous statement from May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often introduce promotional offers, like the $5 meal deal, to alleviate their overhead expenses. Nonetheless, Spiegel emphasized that the bundle primarily serves as a “loss leader” to attract and maintain customer traffic. After accounting for labor, packaging, condiments, delivery, and marketing expenses, she stated that franchise owners effectively eliminate any potential profits from the deal.