McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%. This translates to earnings of approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
The promotion aims to attract consumers who are feeling the pinch of inflation, hoping to encourage them to order more than just the discounted meal. However, the actual profitability of the deal will rely on several factors, including the cost of ingredients, labor, and overall operational expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, referred to the $5 meal deal as “more promotional than profitable.” She pointed out that while it may bring diners back into McDonald’s locations, franchise owners may not see significant profits from it. Approximately 95% of McDonald’s locations are franchise-owned, meaning individual owners have the authority to set their own prices and are burdened with additional costs, such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often implement promotional offers like the $5 meal deal to help offset these overhead costs. Nevertheless, Spiegel indicated that this bundle serves primarily as a “loss leader” to attract and retain customers. Once the added expenses of labor, packaging, condiments, delivery, and marketing are taken into account, it becomes challenging for franchise owners to maintain any profit from the items included in the deal.