McDonald’s stands to gain some profit from its $5 meal deal, although it is projected to be modest. According to restaurant analyst Mark Kalinowski, the profit margin for the combo meal is expected to be between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski explains that this meal deal is a strategy employed by McDonald’s to attract consumers who are feeling the sting of inflation back into their restaurants, with the hope that once inside, they will make additional purchases beyond the $5 option.
However, actual profitability will rely on a variety of factors, including ingredient costs, labor expenses, and overhead. Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.”
Despite potentially increasing foot traffic, it does not guarantee increased profits for franchise owners, who make up about 95% of McDonald’s locations. These franchisees are responsible for setting their prices and managing additional expenses, such as rent, insurance, permits, and taxes.
In comments made in May, McDonald’s U.S. president Joe Erlinger indicated that franchisees often seek to reduce overhead costs by implementing promotional offers like the $5 meal deal. However, Spiegel argues that the offer acts more as a “loss leader to capture and recapture guests.” When factoring in various costs such as labor, packaging, condiments, delivery fees, and marketing, she concluded that franchise owners could ultimately see little to no profit from the deal.