McDonald’s is expected to generate a modest profit from its recent $5 meal deal, with profit margins anticipated to fall between 1% and 5%. This translates to a profit of approximately $0.05 to $0.25 for each combo sold, according to analyst Mark Kalinowski.
Kalinowski indicated that this promotional offer aims to attract consumers who are feeling the effects of inflation and encourage them to make additional purchases beyond the $5 meal. However, the potential for profit is influenced by various factors, including the costs associated with ingredients, labor, and other overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She noted that even if the combo draws customers back into the restaurants, franchisees may not benefit from the profits. With around 95% of McDonald’s locations being franchise-operated, owners determine their own pricing and manage various additional costs, including rent, insurance, permits, and taxes.
In a statement made in May, Joe Erlinger, president of McDonald’s U.S., highlighted that franchisees often implement promotional deals like the $5 meal to help offset their overhead costs. Nevertheless, Spiegel emphasized that the meal deal functions primarily as a “loss leader” designed to attract customers. After accounting for expenses related to labor, packaging, condiments, delivery, and marketing, she suggested that franchisees may effectively eliminate profits associated with the deal altogether.