McDonald’s is expected to see a modest profit from its $5 meal deal, but the margins are quite slim. According to restaurant analyst Mark Kalinowski, the profit margin for this combo meal is projected to range from 1% to 5%, translating to about $0.05 to $0.25 for each bundle sold.
Kalinowski noted that this offering is part of McDonald’s strategy to attract inflation-weary customers back to their restaurants, with the hope that they will purchase additional items beyond the $5 deal. However, the potential for profitability relies on various factors, including ingredient costs, labor expenses, and general overhead.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She emphasized that while the deal might draw diners into McDonald’s locations, franchisees might not see associated profits.
Approximately 95% of McDonald’s restaurants are franchise-owned, meaning individual franchisees determine their own pricing and must manage various expenses such as rent, insurance, permits, and taxes. Joe Erlinger, the U.S. president of McDonald’s, previously mentioned that franchisees often use promotions, like the $5 meal deal, to help offset these overhead costs.
Despite these efforts, Spiegel pointed out that the deal serves as a “loss leader” intended to attract and retain customers. After considering the costs of labor, packaging, condiments, delivery, and marketing, franchise owners often find that these expenses effectively eliminate any profit from the items included in the deal.