McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to earnings of approximately $0.05 to $0.25 per meal, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this promotional offer is part of McDonald’s strategy to attract consumers who are facing inflation challenges, encouraging them to visit the restaurant and potentially spend more than just on the $5 deal.
However, the profitability of this meal deal is contingent on several factors, including the costs of ingredients, labor, and other overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Though the combo could help draw customers back into the restaurants, franchise owners may not see significant profits. Approximately 95% of McDonald’s locations are franchise-owned, meaning that individual owners set their own prices and bear additional costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, indicated that franchisees utilize promotional strategies like the $5 meal deal to offset their overhead costs. Despite this, Spiegel referred to the bundle as a “loss leader” designed to attract and retain customers. After considering the expenses related to labor, packaging, condiments, delivery fees, and marketing, she stated that franchise owners may ultimately negate any profit from the deal.