McDonald’s anticipates that its $5 meal deal could yield a small profit, potentially ranging from 1% to 5%, translating to about $0.05 to $0.25 for each combo sold, as per insights from restaurant analyst Mark Kalinowski.
This meal deal is viewed as a strategy to attract inflation-weary consumers back to the restaurant, with the hope that they will purchase additional items beyond the $5 offering.
However, the overall profitability of the deal hinges on various factors, including the costs of ingredients, labor, and other overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the meal deal as “more promotional than profitable.”
It’s essential to note that while the meal deal may increase foot traffic to McDonald’s locations, it does not guarantee profits for franchisees, who own approximately 95% of McDonald’s establishments. These owners set their own prices and bear expenses such as rent, insurance, permits, and taxes.
In a statement from May, Joe Erlinger, president of McDonald’s U.S., indicated that franchisees often implement promotional offers like the $5 meal deal to help manage overhead costs. Nevertheless, Spiegel emphasized that the bundle serves more as a “loss leader to capture and re-capture guests.” When considering additional expenses such as labor, packaging, condiments, delivery charges, and marketing, franchise owners effectively eliminate any profit margins on the items involved in the deal.