McDonald’s is poised to earn a profit from its $5 meal deal, but it will likely be a small one. According to restaurant analyst Mark Kalinowski, the profit margin for this combo is expected to be between 1% and 5%, translating to earnings of approximately $0.05 to $0.25 for each meal sold.
Kalinowski noted that this deal is a strategy for McDonald’s to attract customers who are feeling the pinch of inflation, with the hope that once they are in the restaurant, they will be encouraged to make additional purchases beyond the $5 meal.
However, the actual profitability will depend on various factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, indicated that the $5 meal deal is more of a promotional tactic than a significant profit generator.
While the combo may draw diners back into restaurants, franchise owners may not necessarily benefit from these profits. About 95% of McDonald’s locations are franchise-owned, meaning that these owners set their own prices and must manage additional expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, stated that franchisees often use promotional offers like the $5 meal deal to help offset their overhead costs. Nonetheless, Spiegel remarked that the deal functions more as a “loss leader” designed to attract and retain customers. After accounting for the various costs related to labor, packaging, condiments, delivery, and marketing, owners may find that they essentially eliminate any profit from the items included in the deal.