McDonald’s is expected to see a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to about $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski.
Kalinowski suggests that this promotion aims to attract consumers who are feeling the effects of inflation, encouraging them not only to take advantage of the $5 deal but also to make additional purchases once they are in the restaurant.
However, the profitability of this deal will hinge on several factors, including ingredient costs, labor expenses, and overheads. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that while the meal deal could drive traffic to McDonald’s, it is more of a promotional tactic rather than a significant profit generator.
It’s important to consider that around 95% of McDonald’s locations are franchise-owned, meaning individual owners establish pricing and confront various costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s USA, indicated that franchisees implement promotional strategies like the $5 meal deal to help offset their overheads. Despite this, Spiegel pointed out that the combo often serves as a “loss leader” aimed at attracting customers, and when additional expenses like labor, packaging, condiments, delivery costs, and marketing are included, franchise owners may not see any profit from the items in the deal.