McDonald’s may generate a slight profit from its $5 meal deal, but it is expected to be modest. Restaurant analyst Mark Kalinowski estimates that the profit margin on this combo will range from 1% to 5%, equating to approximately $0.05 to $0.25 per meal sold.
Kalinowski noted that this promotion aims to entice consumers who are feeling the effects of inflation, encouraging them to enter the restaurant and potentially purchase more items beyond the $5 deal.
However, the overall profitability of the meal deal will be influenced by various factors, including the cost of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Spiegel highlighted that while the combo may draw customers back to McDonald’s, franchise owners may not experience the expected profits. Approximately 95% of McDonald’s locations are franchise-owned, meaning these operators set their own prices and manage additional expenses like rent, insurance, permits, and taxes.
In a May statement, Joe Erlinger, president of McDonald’s U.S., explained that franchisees often resort to promotional offers like the $5 meal deal to counteract their overhead costs. Nevertheless, Spiegel referred to the bundle as a “loss leader” intended to attract and retain customers.
When considering the extra expenses tied to labor, packaging, condiments, delivery fees, and marketing, she concluded that franchise owners may find that any potential profit is significantly diminished or entirely wiped out.