McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins anticipated to be between 1% and 5%. This translates to earnings of approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski explained that the meal offer is part of McDonald’s strategy to attract inflation-sensitive customers back to its restaurants, hoping that once they are inside, they will make additional purchases beyond the $5 deal.
However, the actual profitability of this offer hinges on various factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.”
Even if the deal successfully draws customers to the restaurants, franchise owners may not experience those profits, as approximately 95% of McDonald’s locations are franchise-owned. This means individual owners set their own prices and must manage various costs such as rent, insurance, permits, and taxes.
In a statement from May, McDonald’s U.S. president Joe Erlinger noted that franchisees often attempt to minimize overhead costs by offering promotions like the $5 meal deal. However, Spiegel indicated that this bundle functions primarily as a “loss leader” aimed at attracting and retaining customers. She pointed out that when accounting for additional costs including labor, packaging, condiments, delivery charges, and marketing, franchise owners may essentially eliminate any profit on the items included in the deal.