McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%. According to restaurant analyst Mark Kalinowski, this translates to approximately $0.05 to $0.25 for each combo sold. The deal is part of McDonald’s strategy to attract consumers who are feeling the impact of inflation and encourage them to purchase additional items once they visit the restaurant.
However, the profitability of this meal deal will be influenced by various factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, describes the $5 meal as more of a promotional tool rather than a profit driver.
It’s important to note that around 95% of McDonald’s locations are franchise-owned, meaning that franchisees determine their own pricing and must also manage expenses like rent, insurance, permits, and taxes. In a statement from May, Joe Erlinger, McDonald’s U.S. president, explained that franchisees often create promotional offers like the $5 meal deal to offset their overhead costs.
Spiegel emphasizes that the combo acts as a “loss leader” intended to attract customers back into the restaurant. When additional expenses such as labor, packaging, condiments, delivery, and marketing are accounted for, franchise owners may find that they effectively eliminate any potential profit from the deal.