McDonald’s is expected to earn only a modest profit margin from its $5 meal deal, estimated to be between 1% and 5%, which translates to approximately $0.05 to $0.25 for each combo sold. According to restaurant analyst Mark Kalinowski, this deal aims to attract consumers who are feeling the impacts of inflation back into the restaurants, with the hope that they will purchase additional items beyond the $5 meal.
However, profit generation will be influenced by various factors including the costs of ingredients, labor, and other overhead expenses. Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, noted that while the $5 meal deal is intended to bring diners back, it is deemed “more promotional than profitable.”
Approximately 95% of McDonald’s locations are franchise-owned, meaning that individual owners control their pricing and must manage additional expenses such as rent, insurance, permits, and taxes. In May, Joe Erlinger, the president of McDonald’s U.S., indicated that franchisees often utilize promotional offers like the $5 meal deal to offset these overhead costs.
Spiegel emphasized that the meal deal functions primarily as a “loss leader” aimed at attracting and retaining customers. She pointed out that when accounting for labor, packaging, condiments, delivery charges, and marketing costs, franchise owners often find that their profits are significantly diminished or entirely wiped out.