McDonald’s is expected to earn a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%. This translates to earnings of approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
The fast-food chain aims to attract customers who are feeling the pinch of inflation by offering this affordable deal, hoping they will purchase additional items while visiting the restaurant.
However, profitability will be influenced by various factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
While the offer may bring diners back, franchise owners, who operate about 95% of McDonald’s locations, set their own prices and cover various costs like rent, insurance, permits, and taxes. In May, Joe Erlinger, president of McDonald’s U.S., noted that franchisees often implement promotional offers like the $5 deal to manage overhead costs.
Spiegel emphasized that the meal bundle acts as a “loss leader” to attract and retain customers. Once expenses such as labor, packaging, condiments, delivery fees, and marketing are taken into account, she indicated that franchise owners may effectively eliminate any potential profit from the deal.