McDonald’s is expected to see a modest profit from its $5 meal deal, with profit margins estimated between 1% to 5%, translating to gains of approximately $0.05 to $0.25 for each combo sold, as per restaurant analyst Mark Kalinowski.
Kalinowski indicated that the deal aims to attract consumers struggling with inflation back to the store, with the intention of encouraging them to purchase additional items beyond the $5 offer.
However, profitability will be influenced by various factors such as ingredient costs, labor expenses, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, referred to the $5 meal deal as “more promotional than profitable,” suggesting its primary purpose is to boost customer traffic rather than significantly increase profits.
She also noted that even if the deal lures customers back, franchisees might not benefit from the profits. Approximately 95% of McDonald’s locations are franchise-owned, resulting in owners setting their own prices while managing various costs, including rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees often implement promotional offers like the $5 meal deal to help lessen these overhead costs. However, Spiegel remarked that the bundle acts more like a “loss leader,” aimed at drawing in customers. Once factors like labor, packaging, condiments, delivery fees, and marketing costs are considered, franchise owners might find their potential profits significantly diminished.