McDonald’s is expected to see a modest profit from its $5 meal deal, with projected profit margins ranging from 1% to 5%. According to restaurant analyst Mark Kalinowski, this translates to earnings of approximately $0.05 to $0.25 for each combo sold.
The fast food giant aims to attract budget-conscious consumers who are feeling the pinch of inflation. The strategy is to entice customers with the low-priced meal, hoping they will make additional purchases while at the restaurant.
However, profitability will depend on various factors such as ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal leans more towards being a promotional effort rather than a profitable venture.
Importantly, the majority of McDonald’s locations—about 95%—are franchise-owned, meaning that individual franchise owners set their own prices and manage expenses such as rent, insurance, permits, and taxes.
In a recent statement, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often use promotional deals like the $5 meal to help offset these overhead costs. Despite this, Spiegel indicated that the bundle primarily serves as a “loss leader” to attract customers, and once costs related to labor, packaging, condiments, delivery, and marketing are considered, franchise owners may find that there’s little to no profit from the items in the deal.