McDonald’s may achieve only a modest profit from its $5 meal deal, with estimates suggesting a profit margin between 1% and 5%. This translates to approximately $0.05 to $0.25 per combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski explained that the meal deal is a strategy for McDonald’s to attract consumers who are feeling the pinch of inflation. The goal is to bring customers back into the restaurant in hopes that they will purchase additional items beyond the $5 offer.
However, profitability is contingent on several factors, including the costs of ingredients, labor, and other overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She noted that even if the offer successfully draws in diners, it does not guarantee that franchise owners will see any profit.
Approximately 95% of McDonald’s locations are owned by franchisees, meaning each owner sets their own prices and manages various expenses such as rent, insurance, permits, and taxes. Earlier this year, Joe Erlinger, the president of McDonald’s USA, mentioned that franchisees implement promotional pricing, like the $5 meal deal, to help offset these overhead costs.
Despite this, Spiegel characterized the bundle as a “loss leader” intended to attract and retain customers. After accounting for labor, packaging, condiments, delivery fees, and marketing costs, she indicated that franchise owners might effectively eliminate any potential profit on the items offered in the deal.