McDonald’s may achieve a profit from its $5 meal deal, but it is expected to be modest. Restaurant analyst Mark Kalinowski predicts that the profit margin for this combination meal will range between 1% and 5%, which translates to earnings of about $0.05 to $0.25 for each bundle sold.
Kalinowski noted that this deal aims to attract consumers who are feeling the pinch of inflation, with the intention of encouraging them to purchase more items once they are in the restaurant. However, the ability to generate a profit will hinge on various factors, such as the expenses associated with ingredients, labor, and overall overhead.
Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, characterized the $5 meal deal as being “more promotional than profitable.” She pointed out that while the deal may bring customers back, franchisees might not actually see any significant profits.
About 95% of McDonald’s restaurants are franchise-operated, meaning that franchise owners establish their own pricing and manage their additional costs, including rent, insurance, permits, and taxes. In May, Joe Erlinger, the president of McDonald’s U.S., mentioned that franchisees often run promotional offers, such as the $5 meal deal, to help mitigate these overhead expenses.
Nevertheless, Spiegel described the meal deal as primarily a “loss leader intended to attract and retain customers.” After accounting for labor, packaging, condiments, delivery expenses, and marketing, she indicated that franchise owners may effectively eliminate any profit margin on the items included in the deal.