McDonald’s is expected to generate a modest profit from its $5 meal deal, with margins estimated between 1% and 5%, equating to earnings of $0.05 to $0.25 per meal sold, as indicated by restaurant analyst Mark Kalinowski. This promotional strategy aims to attract inflation-weary consumers back to the restaurant, encouraging them to purchase more items beyond the $5 combo.
However, actual profitability will hinge on several factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the deal as “more promotional than profitable.”
While the $5 meal deal may boost foot traffic, it doesn’t guarantee profits for franchise owners, who comprise about 95% of McDonald’s locations. Franchisees control their pricing and must cover various costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, the U.S. president of McDonald’s, mentioned that franchisees often implement promotional deals, like the $5 meal, to mitigate overhead expenses. Nevertheless, Spiegel noted that this offer mainly acts as a “loss leader” aimed at attracting and retaining customers. After accounting for additional costs associated with labor, packaging, condiments, delivery, and marketing, franchise owners may find that the deal eliminates any profit margins from the items included.