McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, equating to approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this marketing strategy aims to attract consumers who are feeling the pinch of inflation, encouraging them to visit the restaurant and potentially make additional purchases beyond the $5 meal.
However, the actual profitability of the deal will be influenced by various factors including the prices of ingredients, labor costs, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, emphasized that the $5 meal deal is likely more promotional than profitable. She pointed out that while the combo could bring diners into the restaurant, it may not directly translate into profits for franchise owners.
Currently, about 95% of McDonald’s locations are operated by franchisees, who have the autonomy to set their own prices and manage additional costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s USA, indicated that franchisees often launch promotional deals like the $5 meal to offset these overhead costs.
Spiegel explained that the bundle functions more as a “loss leader” aimed at attracting and retaining customers. Once franchise owners account for the extra expenses tied to labor, packaging, condiments, delivery fees, and marketing, they essentially eliminate any potential profit from the items included in the deal.