McDonald’s is expected to achieve only modest profits from its $5 meal deal, with profit margins estimated between 1% and 5%. This translates to earnings of roughly $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the promotion is part of McDonald’s strategy to attract inflation-strained consumers back into their restaurants, with the hope that once inside, they will purchase additional items beyond the $5 deal.
However, the profitability of this offer is contingent on various factors including the costs of ingredients, labor, and other overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Additionally, while the combo may bring customers back, franchise owners might not enjoy the benefits. Approximately 95% of McDonald’s locations are franchisee-owned, meaning these owners have the autonomy to set their own prices and bear additional costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., indicated that franchisees often employ promotional offerings like the $5 meal deal to offset their overheads. However, Spiegel remarked that the deal primarily serves as a “loss leader” aimed at attracting customers. Once the expenses associated with labor, packaging, condiments, delivery, and marketing are accounted for, owners may effectively eliminate any potential profits from the meal deal.