McDonald’s may earn a slight profit from its $5 meal deal, but the gains are expected to be minimal. According to restaurant analyst Mark Kalinowski, the profit margin on the combo could range from 1% to 5%, translating to approximately $0.05 to $0.25 for each meal sold.
Kalinowski noted that this deal aims to attract inflation-sensitive customers back to the fast-food chain, with the hope that they will purchase additional items beyond the $5 offer. However, the ability to turn a profit is contingent upon various factors, including the costs of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, emphasized that the $5 meal deal is “more promotional than profitable.” She further explained that while the deal might help draw customers to the restaurant, it does not guarantee profits for franchisees, who own about 95% of McDonald’s locations. Franchise owners set their own prices and bear the burden of additional costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, President of McDonald’s U.S., mentioned that franchisees attempt to offset these overhead costs by offering promotions like the $5 meal deal. Nevertheless, Spiegel characterized the deal as primarily a “loss leader” aimed at attracting and retaining customers. After accounting for expenses related to labor, packaging, condiments, delivery, and marketing, she indicated that franchisees often end up losing any profit from the items included in the deal.