McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%. This translates to earnings of approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the $5 deal aims to attract price-sensitive consumers amid ongoing inflation, with the hope that customers will spend more than just on the discounted offering once they are in the restaurant.
However, profitability will be influenced by various factors, including ingredient costs, labor, and other overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.”
While the combo may entice diners back to McDonald’s locations, it does not guarantee profits for franchise owners. Approximately 95% of McDonald’s outlets are franchise-operated, meaning that franchisee owners determine their own pricing and manage additional costs like rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s USA, indicated that franchisees implement promotions like the $5 meal deal to help manage overhead costs. Nevertheless, Spiegel emphasized that the meal deal serves primarily as a “loss leader” to attract and retain customers. Once additional costs related to labor, packaging, condiments, delivery, and marketing are included, franchise owners may find that profits from the deal are effectively eliminated.