McDonald’s is expected to achieve a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
This meal deal is part of McDonald’s strategy to attract inflation-weary consumers back to its restaurants, with the hope that they will purchase additional items beyond the $5 offering.
However, profitability hinges on various factors, including the costs of ingredients, labor, and general overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, categorized the deal as “more promotional than profitable.”
Although the combo may succeed in bringing customers back, franchisees may not directly benefit from those profits. With around 95% of McDonald’s locations being franchise-owned, individual owners set prices and bear additional costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often introduce promotional offers like the $5 meal deal to offset overhead costs. Nonetheless, Spiegel noted that the combo primarily serves as a “loss leader” aimed at capturing and recapturing customers. After accounting for labor, packaging, condiments, delivery fees, and marketing expenses, she pointed out that franchise owners could effectively eliminate any potential profit from the items included in the deal.