McDonald’s is set to profit from its $5 meal deal, albeit modestly. According to restaurant analyst Mark Kalinowski, the fast food chain is expected to achieve a profit margin between 1% and 5%, translating to a profit of approximately $0.05 to $0.25 for each combo sold.
Kalinowski noted that the deal aims to attract consumers who are feeling the effects of inflation, with hopes that once inside the restaurant, they will purchase additional items beyond the $5 offering.
However, actual profitability will hinge on various factors, including ingredient costs, labor expenses, and overheads. Arlene Spiegel, president of Arlene Spiegel & Associates, described the meal deal as “more promotional than profitable.”
Additionally, while the promotion may entice diners, franchisees may not necessarily benefit from the profits. Approximately 95% of McDonald’s outlets are franchise-owned, meaning these owners determine their prices and bear the burden of expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., indicated that franchisees often launch promotional offers like the $5 deal to manage overhead costs. Nevertheless, Spiegel emphasized that the bundle acts primarily as a “loss leader” to attract and retain customers. After accounting for labor, packaging, condiments, delivery charges, and marketing expenses, she asserted that franchise owners effectively erase any profit margin on the items included in the deal.