McDonald’s may generate a profit from its $5 meal deal, although the profit margin is expected to be modest. Restaurant analyst Mark Kalinowski estimates that the chain’s profit margin on this combo meal could range from 1% to 5%, translating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski suggests that the meal deal aims to attract price-sensitive customers facing inflation, with the hope that once inside, customers will purchase additional items beyond the $5 offer.
However, the ability to turn a profit will depend on several factors, including the costs associated with ingredients, labor, and overall overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Moreover, even if the promotion encourages diners to visit the restaurant, it doesn’t guarantee that franchise owners will benefit financially. About 95% of McDonald’s locations are franchisee-owned, meaning they have the autonomy to set prices and manage their own expenses like rent, insurance, permits, and taxes.
In a statement from May, McDonald’s U.S. president Joe Erlinger noted that franchisees often run promotional deals, like the $5 meal, to offset their overhead costs. Nonetheless, Spiegel pointed out that the value meal serves more as a “loss leader” to attract and retain customers. When factoring in additional costs such as labor, packaging, condiments, delivery fees, and marketing, she indicated that franchise owners may eliminate any profit associated with the individual items in the deal.