McDonald’s is expected to generate a profit, albeit a modest one, from its $5 meal deal. According to restaurant analyst Mark Kalinowski, the profit margin on this combo is likely to be between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski noted that this promotion aims to attract financially strained consumers back to McDonald’s locations, with the hope that while they are there, they will purchase additional items beyond the $5 meal.
However, turning a profit hinges on various factors, including the costs of ingredients, labor, and overall operational expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Spiegel pointed out that even if the deal successfully brings customers back, franchisees may not see significant profits since about 95% of McDonald’s locations are franchise-owned. These owners set their own pricing and bear additional costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., stated that franchisees often run promotional offers like the $5 meal deal to help offset overhead costs. Nonetheless, Spiegel referred to the meal deal as a “loss leader” designed to attract and retain customers. After considering the extra expenses for labor, packaging, condiments, delivery, and marketing, franchise owners could ultimately lose any profit from these promotional items.