McDonald’s is expected to generate a modest profit margin from its $5 meal deal, estimated to be between 1% and 5%, translating to roughly $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
This promotion is aimed at attracting inflation-weary consumers back into the restaurants, encouraging them to purchase more than just the $5 meal. However, the profitability of this deal will hinge on various factors, including ingredient costs, labor expenses, and overhead.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She noted that while the offer may entice customers to visit, franchisees might not experience significant profits from it. With about 95% of McDonald’s locations being franchise-owned, individual owners set their own prices and manage additional costs such as rent, insurance, and taxes.
In a statement from May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often launch promotional offers like the $5 meal deal to offset these overhead expenses. Still, Spiegel emphasized that this bundle mainly serves as a “loss leader to capture and re-capture guests.” After accounting for labor, packaging, condiments, delivery charges, and marketing expenses, franchise owners may find that profits from the deal are minimal or non-existent.