McDonald’s is anticipated to generate a modest profit from its $5 meal deal, with profit margins expected to range between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the promotion aims to attract consumers who are feeling the pressure of inflation, encouraging them to make additional purchases beyond the $5 offer once they visit the restaurant.
However, profitability is contingent on various factors, including the cost of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, suggested that the $5 meal deal is more about promotion than actual profit.
Even if the deal successfully draws customers back into McDonald’s, franchise owners may not benefit from these profits, as around 95% of McDonald’s locations are franchisee-operated. Consequently, franchise owners determine their own prices and manage added costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchise owners often use promotional deals to help offset their overhead expenses. Despite this, Spiegel described the meal combo as a “loss leader” intended to attract and retain customers. After accounting for additional costs like labor, packaging, condiments, delivery charges, and marketing, she indicated that franchise owners often see little to no profit from the items within the deal.