McDonald’s is set to roll out a $5 meal deal that may generate modest profits for the fast-food giant. According to restaurant analyst Mark Kalinowski, the profit margin for this combo meal is expected to range between 1% and 5%, which translates to a profit of about $0.05 to $0.25 per meal sold.
Kalinowski noted that the deal is aimed at attracting inflation-weary customers back to McDonald’s, with the hope that once inside, they will spend more than just on the $5 meal. However, the profitability of the deal will rely on several factors, including the costs of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She pointed out that while the combo may entice customers, franchise owners—who control about 95% of McDonald’s locations—have additional costs to consider, including rent, insurance, and taxes, which they must manage independently.
In May, Joe Erlinger, president of McDonald’s U.S., stated that franchisees use promotional offerings like the $5 meal deal to help offset their overhead costs. However, Spiegel emphasized that the deal acts more as a “loss leader,” designed to draw customers in and encourage repeat visits. She added that when considering the extra costs for labor, packaging, condiments, delivery, and marketing, franchise owners often find themselves erasing any potential profit from the promotion.