McDonald’s is expected to achieve only a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%. This translates to earnings of approximately $0.05 to $0.25 for each meal combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski indicated that this promotion is part of McDonald’s strategy to attract inflation-weary customers back to its restaurants, with the hope that they will purchase more than just the $5 meal. However, the profitability of this deal will be influenced by several factors, including ingredient costs, labor expenses, and overhead.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She noted that even if this offer draws customers in, franchise owners may not see those profits due to their unique costs. Approximately 95% of McDonald’s locations are franchised, meaning these owners set their own prices and manage additional costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often try to offset these costs through promotional deals like the $5 meal. Nonetheless, Spiegel considers the meal deal a “loss leader,” primarily intended to attract and retain customers. She pointed out that once the costs of labor, packaging, condiments, delivery, and marketing are accounted for, franchise owners often eliminate any potential profit from the items included in the deal.