McDonald’s is anticipated to generate a profit from its $5 meal deal, but it is expected to be minimal. According to restaurant analyst Mark Kalinowski, the profit margin for the combo may range from 1% to 5%, equating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski noted that the deal aims to attract consumers who are feeling the effects of inflation, encouraging them to enter the restaurant and potentially spend on more items beyond the $5 offering. However, profitability will be influenced by various factors, including the costs of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” Even if it brings diners back, franchise owners might not benefit directly from those sales, as approximately 95% of McDonald’s locations are franchisee-operated. This means individual owners can set their own prices and must cover additional expenses like rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees often use promotional offers, such as the $5 meal deal, to help manage overhead costs. Nevertheless, Spiegel stated that the bundle primarily serves as a “loss leader to capture and re-capture guests.” Once the expenses related to labor, packaging, condiments, delivery charges, and marketing are considered, she indicated that owners may end up erasing any profit from the deal.