McDonald’s may see a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to approximately $0.05 to $0.25 profit for each combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this deal is part of McDonald’s strategy to attract inflation-strapped consumers back to their restaurants, with the hope that once inside, customers will make additional purchases beyond the $5 meal.
However, profitability will hinge on various factors, such as the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Even if the promotion successfully draws in customers, it may not guarantee profits for franchise owners, as around 95% of McDonald’s locations are franchisee-operated. These owners have the autonomy to set their own prices but also bear the burden of expenses like rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, stated that franchisees often use promotional offers, including the $5 meal deal, to help manage their overhead costs. Nevertheless, Spiegel characterized the bundle as a “loss leader” aimed at attracting and retaining customers.
She highlighted that when accounting for labor, packaging, condiments, delivery fees, and marketing costs, franchise owners may effectively eliminate any profit from the deal.