McDonald’s is set to introduce a $5 meal deal that is expected to generate only a modest profit for the fast-food chain. According to restaurant analyst Mark Kalinowski, the profit margin on this combo meal is projected to be between 1% and 5%, translating to approximately $0.05 to $0.25 for each meal sold.
Kalinowski noted that this pricing strategy aims to attract inflation-weary consumers back into the restaurant, with hopes that they will spend more than just the $5 deal while inside. However, the ability to make a profit will be influenced by various factors, including the costs of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, characterized the $5 meal deal as “more promotional than profitable.” She highlighted that even if the promotion drives traffic to the restaurants, it may not guarantee profits for franchise owners. Nearly 95% of McDonald’s locations are franchise-owned, meaning that the individual owners determine pricing and deal with costs associated with rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., indicated that franchisees utilize promotional deals like the $5 meal to help manage their overhead costs. Spiegel further emphasized that the meal bundle functions as a “loss leader” to attract and retain customers. Once costs related to labor, packaging, condiments, delivery, and marketing are considered, franchise owners may ultimately eliminate any potential profit from the items included in the deal.