McDonald’s is anticipated to see a profit from its recently introduced $5 meal deal, though the earnings are expected to be modest. According to restaurant analyst Mark Kalinowski, the profit margin on this combo meal is likely to be between 1% and 5%, translating to a profit of approximately $0.05 to $0.25 for each bundle sold.
Kalinowski noted that the meal deal is part of McDonald’s strategy to attract price-sensitive consumers who are grappling with inflation. The goal is to encourage customers to not only purchase the $5 meal but also to buy additional items once inside the restaurant.
However, the actual profitability may be influenced by various factors including ingredient costs, labor expenses, and other overheads. Arlene Spiegel, president of Arlene Spiegel & Associates, pointed out that the $5 meal deal is “more promotional than profitable.”
While the promotion may help draw customers back into McDonald’s, it does not guarantee that franchise owners will share in the profits. Approximately 95% of McDonald’s locations are franchise-operated, meaning these owners set their own prices and are responsible for additional costs such as rent, insurance, permits, and taxes.
In previous statements, Joe Erlinger, the U.S. president of McDonald’s, indicated that franchisees often implement promotional deals like the $5 meal to alleviate overhead costs. Nevertheless, Spiegel emphasized that this bundle acts more as a “loss leader” aimed at attracting and retaining customers. When considering the extra expenses related to labor, packaging, condiments, delivery, and marketing, she noted that owners could effectively eliminate any potential profit from the items included in the deal.