McDonald’s could generate a profit from its $5 meal deal, but it’s expected to be modest. According to restaurant analyst Mark Kalinowski, the profit margin for the combo is anticipated to be between 1% and 5%, translating to earnings of approximately $0.05 to $0.25 for each meal sold.
Kalinowski noted that the purpose of the deal is to attract inflation-strained consumers back to the restaurant, with the hope that once customers arrive, they will make additional purchases beyond the $5 offer.
However, profitability is contingent on various factors, including ingredient costs, labor expenses, and overhead. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, referred to the meal deal as “more promotional than profitable.”
While the deal may entice diners to return, it doesn’t guarantee that franchise owners will see additional profits. About 95% of McDonald’s locations are franchisee-owned, meaning that individual owners set their own prices and manage additional expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, the president of McDonald’s U.S., indicated that franchisees often implement promotional offers like the $5 meal deal to offset overhead costs. Nevertheless, Spiegel characterized the deal as a “loss leader” aimed at attracting and retaining customers.
With the added expenses of labor, packaging, condiments, delivery, and marketing, she explained that many franchisees might end up eliminating any profit entirely from the items included in the deal.