McDonald’s may see some profit from its $5 meal deal, although the margin is expected to be modest. According to restaurant analyst Mark Kalinowski, the profit margin on this combo meal is anticipated to be between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold.
This promotional strategy is aimed at enticing consumers who are feeling the effects of inflation back into its restaurants, with the hope that they will purchase additional items beyond the $5 meal. However, profitability is contingent on various factors including ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, remarked that the $5 meal deal is seen as “more promotional than profitable.” She highlights that even if the combo draws customers back, franchisees may not fully benefit from the profits since about 95% of McDonald’s locations are franchise-owned. This means that franchise owners set their own prices and manage additional expenses such as rent, insurance, permits, and taxes.
In comments made in May, McDonald’s U.S. president Joe Erlinger noted that franchisees often employ promotional offers, like the $5 deal, to mitigate overhead costs. Nonetheless, Spiegel emphasized that this bundle primarily serves as a “loss leader” to both attract and retain customers. After accounting for additional costs such as labor, packaging, condiments, delivery fees, and marketing, franchise owners might lose any potential profit on the items included in the deal.