McDonald’s may earn a profit from its $5 meal deal, although it is expected to be modest. According to restaurant analyst Mark Kalinowski, the profit margin on the combo is estimated to be between 1% and 5%, translating to approximately $0.05 to $0.25 per meal sold.
Kalinowski explained that this deal aims to attract inflation-sensitive customers back to the restaurant, with hopes that once they are inside, they will purchase additional items beyond the $5 offering.
However, achieving profitability is contingent on various factors, including ingredient costs, labor expenses, and overhead, leading Arlene Spiegel, president of Arlene Spiegel & Associates, to describe the $5 meal as “more promotional than profitable.”
Even if this deal successfully draws in diners, it does not guarantee that franchisees will benefit from the profits. Approximately 95% of McDonald’s locations are franchise-owned, meaning the franchisees set their own prices and manage additional expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., noted that franchisees employ promotional offers like the $5 meal deal to help offset their overhead costs. Nevertheless, Spiegel asserted that the bundle acts more as a “loss leader” aimed at attracting and retaining customers. When additional costs for labor, packaging, condiments, delivery, and marketing are factored in, she stated that franchise owners often end up eliminating any potential profit from the items included in the deal.