McDonald’s may see some profit from its $5 meal deal, but it will likely be modest. Analyst Mark Kalinowski estimates that the profit margin on this combo meal could range from 1% to 5%, translating to about $0.05 to $0.25 for every meal sold.
According to Kalinowski, this initiative is part of McDonald’s strategy to attract inflation-sensitive consumers back to its restaurants, with hopes that once customers are there, they will purchase additional items besides the $5 meal.
However, profitability will rely heavily on various factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Even if this offer encourages customers to visit the restaurant, it does not guarantee that franchisees will see any substantial profits. Approximately 95% of McDonald’s locations are franchise-owned, meaning that individual owners determine their own pricing and face additional costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S. operations, noted that franchise owners often employ promotional deals like the $5 meal to help offset their overhead costs. However, Spiegel remarked that the combo is essentially a “loss leader” meant to both attract and retain customers. When considering the extra costs associated with labor, packaging, condiments, delivery, and marketing, she indicated that franchise owners might eliminate any profit from this deal altogether.