McDonald’s may see a slight profit from its $5 meal deal, but it is expected to be minimal. According to restaurant analyst Mark Kalinowski, the fast food chain’s profit margin on this combo could range from 1% to 5%, translating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski indicated that this meal deal is a strategy to attract inflation-weary customers back to the restaurant, with the hope that they will purchase additional items beyond the $5 offering.
However, the potential for profit hinges on factors such as ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, mentioned that the $5 meal deal is “more promotional than profitable.”
Even if the combo succeeds in bringing customers into the restaurant, franchise owners may not necessarily benefit from the profits. Approximately 95% of McDonald’s locations are franchise-owned, meaning that individual owners set their own prices and manage their own expenses, which include rent, insurance, permits, and taxes.
In May, Joe Erlinger, the U.S. president of McDonald’s, stated that franchisees often try to offset overhead costs by offering promotions like the $5 meal deal. Nonetheless, Spiegel pointed out that the bundle acts more as a “loss leader to capture and re-capture guests.” When factoring in additional costs such as labor, packaging, condiments, delivery charges, and marketing, she noted that owners may effectively eliminate any potential profit from the deal.