McDonald’s may achieve a slight profit from its $5 meal deal, but it is expected to be modest. According to restaurant analyst Mark Kalinowski, the profit margin on this combo will likely range from 1% to 5%, equating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski noted that this initiative is part of McDonald’s strategy to attract price-sensitive consumers impacted by inflation, with hopes that once customers are in the restaurant, they will purchase additional items beyond the $5 deal.
However, the profitability of the meal deal is influenced by various factors, including ingredient costs, labor, and other overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.”
Spiegel explained that while the combo may encourage customer visits, franchise owners may not reap the losses incurred from the deal. Approximately 95% of McDonald’s outlets are franchise-owned, which means individual owners set their prices and bear costs such as rent, insurance, permits, and taxes.
Joe Erlinger, McDonald’s U.S. president, previously stated that franchisees often run promotional offers like the $5 meal deal to offset their overhead costs. Nevertheless, Spiegel described the bundle as a “loss leader” intended to attract and retain customers. When considering additional costs such as labor, packaging, condiments, delivery, and marketing, she indicated that owners might end up erasing any potential profit from the items included in the deal.