McDonald’s is poised to earn a modest profit from its newly introduced $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, as noted by restaurant analyst Mark Kalinowski.
Kalinowski indicated that this meal deal is part of McDonald’s strategy to attract inflation-burdened consumers back into its restaurants, with the hope that once they are there, they will purchase additional items beyond just the $5 offer.
However, the potential for profit is contingent on various factors, including the costs of ingredients, labor, and general overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as being “more promotional than profitable.”
She emphasized that while the combo may successfully draw diners back, the profits may not necessarily trickle down to franchisees. Approximately 95% of McDonald’s locations are franchise-owned, meaning individual owners set their own prices and deal with extra expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S. operations, stated that franchisees often implement promotional deals like the $5 meal to help mitigate these overhead costs. Despite this, Spiegel referred to the bundle primarily as a “loss leader,” aimed at attracting and retaining customers.
After taking into account expenses related to labor, packaging, condiments, delivery charges, and marketing, she noted that franchise owners often see their profits effectively eradicated on these promotional items.