McDonald’s is anticipated to see a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%. This translates to earnings of approximately $0.05 to $0.25 for each combo sold, as noted by restaurant analyst Mark Kalinowski.
Kalinowski indicated that the meal deal aims to attract consumers who are grappling with inflation, hoping that once customers are inside the restaurant, they will purchase additional items beyond the $5 offering.
However, the profitability of this deal will depend on various factors including ingredient costs, labor, and overhead expenses. According to Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, the $5 meal deal is seen as “more promotional than profitable.”
Even if the combo encourages diners to visit the restaurant, franchisees may not necessarily benefit from those profits. Approximately 95% of McDonald’s restaurants 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, president of McDonald’s U.S., explained that franchisees attempt to offset overhead costs by running promotional offers like the $5 meal deal. Nevertheless, Spiegel emphasized that the bundle acts more as a “loss leader” to attract customers. Once factors like labor, packaging, condiments, delivery charges, and marketing are taken into account, she stated that owners may lose any potential profit on the items included in the deal.