McDonald’s is expected to generate some profit from its $5 meal deal, but the gains will be modest. According to restaurant analyst Mark Kalinowski, the profit margin for this combo meal is projected to be between 1% and 5%, translating to approximately $0.05 to $0.25 for each meal sold.
Kalinowski noted that this initiative is part of McDonald’s strategy to attract budget-conscious consumers who are facing inflation. The hope is that once customers enter the store for the $5 deal, they will opt for additional items.
However, profitability hinges on several factors, such as fluctuations in ingredient costs, labor expenses, and other overhead costs. Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, classified the $5 meal deal as “more promotional than profitable.”
A significant portion of McDonald’s locations, about 95%, are franchisee-operated, meaning individual owners determine their pricing and absorb added expenses like rent, insurance, and taxes.
In May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often launch promotional offers, including the $5 meal deal, to manage their overhead costs. Despite this strategy, Spiegel emphasized that the deal serves primarily as a “loss leader” aimed at attracting and retaining customers. When considering the additional costs associated with labor, packaging, condiments, delivery, and marketing, she indicated that franchise owners often lose any potential profit from the meal deal.