McDonald’s may expect to generate a profit from its $5 meal deal, though that profit is projected to be modest. According to restaurant analyst Mark Kalinowski, the fast-food chain’s profit margin on the combo is estimated to be between 1% and 5%, translating to approximately $0.05 to $0.25 for each meal sold.
Kalinowski noted that the meal deal is part of McDonald’s strategy to attract consumers who are feeling the pressure of inflation. The company aims to bring these customers into their locations in hopes they will make additional purchases beyond the $5 meal.
However, turning this promotion into a profit relies on various factors, including ingredient costs, labor expenses, and general overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.”
Although the meal deal could entice customers back to McDonald’s, franchise owners might not benefit fully from this initiative. Approximately 95% of McDonald’s locations are franchise-operated, meaning franchisees have control over pricing while also managing various expenses, including rent, insurance, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., acknowledged that franchisees often utilize promotional pricing, such as the $5 meal deal, to address overhead costs. Nonetheless, Spiegel described the bundle primarily as a “loss leader” aimed at attracting customers back into the restaurants. After considering the costs associated with labor, packaging, condiments, delivery, and marketing, she suggested that franchise owners may end up negating any potential profit from the deal.