McDonald’s is expected to generate a slight profit from its $5 meal deal, with margins projected between 1% and 5%, translating to earnings of approximately $0.05 to $0.25 per combo sold, as indicated by restaurant analyst Mark Kalinowski.
Kalinowski emphasized that the meal deal is a strategy to attract consumers affected by inflation back to the restaurant, with hopes that those customers will purchase additional items beyond the $5 offer.
However, profitability will hinge on various factors, including the cost of ingredients, labor, and other overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 deal as “more promotional than profitable.”
Even if the combo successfully draws diners back into the restaurant, this does not guarantee that franchise owners will see those profits, Spiegel pointed out in an email to Quartz. Approximately 95% of McDonald’s locations are franchise-owned, meaning that individual owners set their own prices and are responsible for covering costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often use promotional offers, like the $5 meal deal, to offset their overhead expenses. Despite this, the bundle is primarily viewed as a “loss leader” aimed at attracting customers.
After accounting for the additional costs associated with labor, packaging, condiments, delivery fees, and marketing, Spiegel stated that franchise owners effectively eliminate any profit margin on the items included in the deal.