McDonald’s may reap some profit from its $5 meal deal, albeit a modest one. According to restaurant analyst Mark Kalinowski, the profit margin on the combo is estimated to be between 1% and 5%, translating to roughly $0.05 to $0.25 for each bundle sold.
Kalinowski noted that this promotion is aimed at drawing in consumers who are struggling with inflation, hoping that once customers enter the restaurant, they will purchase more than just the $5 meal.
However, profitability hinges on various factors, including ingredient prices, labor costs, and overhead expenditures. Arlene Spiegel, president of Arlene Spiegel & Associates, indicated that the $5 meal deal is more of a marketing strategy than a profit-generating initiative.
Even if the offer successfully brings diners back, it does not guarantee profits for franchise owners, who operate 95% of McDonald’s locations. These franchisees set their own prices and must account for additional expenses like rent, insurance, permits, and taxes.
In May, Joe Erlinger, the president of McDonald’s U.S., mentioned that franchisees often use promotional offers like the $5 meal deal to offset overhead costs. Nevertheless, Spiegel pointed out that the deal functions more as a “loss leader” to attract and retain customers.
After factoring in the costs of labor, packaging, condiments, delivery, and marketing, franchise owners may find that they lose any potential profit from the deal.