McDonald’s is expected to see modest profits from its $5 meal deal, potentially earning between 1% and 5% in profit margins, translating to about $0.05 to $0.25 per combo sold, according to restaurant analyst Mark Kalinowski.
The fast-food giant views this deal as a strategy to attract price-sensitive customers dealing with inflation, encouraging them to purchase additional items beyond the $5 meal. However, profitability hinges on various factors including ingredient costs, labor, and other overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is primarily promotional rather than profitable. Even if it successfully draws diners back, there’s no guarantee that franchisees will benefit from these sales, as approximately 95% of McDonald’s locations are franchise-owned. Franchisees have the autonomy to set their prices but also bear various costs like rent, insurance, and taxes.
In a statement from May, McDonald’s U.S. president Joe Erlinger explained that franchisees often implement promotional offerings like the $5 meal to offset their overheads. Nonetheless, Spiegel characterized the meal deal as more of a “loss leader” aimed at attracting and retaining customers. When considering additional costs such as labor, packaging, condiments, delivery fees, and marketing, she concluded that franchise owners may end up absorbing any profits from the items included in the deal.