McDonald’s is expected to generate modest profits from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to about $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski. The fast-food giant hopes this offer will attract customers feeling the pinch of inflation, encouraging them to purchase additional items beyond the $5 combo.
However, the potential for profitability hinges on various factors including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal as “more promotional than profitable.”
While the deal might bring diners back to the restaurant, it may not significantly benefit franchise owners, as approximately 95% of McDonald’s locations are franchise-operated. These owners manage their own pricing and must cover various expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., noted that franchisees often run promotional offers like the $5 meal to help offset their overhead costs. Still, Spiegel pointed out that the meal serves primarily as a “loss leader” to attract and retain customers. After accounting for expenses related to labor, packaging, condiments, delivery, and marketing, she indicated that franchisees may effectively nullify any profit from the promotional deal.