McDonald’s is expected to earn a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to about $0.05 to $0.25 per combo sold, according to restaurant analyst Mark Kalinowski.
The fast-food giant aims to attract inflation-weary consumers with this deal, hoping that customers will purchase more items beyond the $5 offer once they’re enticed into the restaurant.
However, profitability hinges on various factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.”
Even if the offer successfully draws in diners, it does not guarantee that franchisees will see any resulting profits. Approximately 95% of McDonald’s locations are franchise-owned, which means franchisees establish their own pricing and absorb extra expenses like rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., stated that franchisees aim to lower those overhead costs through promotional offers like the $5 meal deal. Nonetheless, according to Spiegel, the bundle serves primarily as a “loss leader” to attract customers.
When considering the additional costs of labor, packaging, condiments, delivery, and marketing, she indicated that franchise owners often find that they eliminate any potential profit from the items included in the deal.