McDonald’s is expected to generate a profit from its $5 meal deal, though it will be quite limited. According to restaurant analyst Mark Kalinowski, the profit margin for this combination meal is projected to be between 1% and 5%, equating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski noted that this pricing strategy is part of McDonald’s effort to attract consumers who are feeling the pinch of inflation. The fast-food giant hopes to entice customers back into restaurants with the $5 deal and encourage them to make additional purchases.
However, overall profitability will rely on various factors, including ingredient costs, labor expenses, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.”
Even if the deal successfully brings diners back, franchisees may not see significant profits, as around 95% of McDonald’s locations are franchise-owned. These owners determine pricing and bear additional costs, such as rent, insurance, permits, and taxes.
In May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often try to alleviate overhead by offering promotions like the $5 meal deal. Nevertheless, Spiegel described the bundle as a “loss leader” aimed at drawing customers in. After considering the extra expenses related to labor, packaging, condiments, delivery, and marketing, owners may find that these deals do not yield any profit on the combined items.