McDonald’s may generate a modest profit from its $5 meal deal, according to restaurant analyst Mark Kalinowski. He estimates that the profit margin on the combo will be between 1% and 5%, translating to roughly $0.05 to $0.25 for each bundle sold.
This promotional offer is part of McDonald’s strategy to attract consumers who are feeling the effects of inflation, encouraging them to explore more than just the $5 options once they are in-store.
However, the success of this promotion hinges on various factors, including ingredient costs, labor, and general overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the deal as “more promotional than profitable.”
Even if the meal deal draws customers back, franchise owners may not benefit significantly since around 95% of McDonald’s locations are franchisee-owned. These owners are responsible for setting their own prices and managing additional costs such as rent and insurance.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often run promotional deals like the $5 meal to offset their overhead expenses. Nevertheless, Spiegel pointed out that the bundle often serves more as a “loss leader” to attract and retain customers. Once all operative costs, including labor and marketing, are taken into account, franchise owners may effectively eliminate any potential profits from the items in the deal.