McDonald’s may generate a modest profit from its recently introduced $5 meal deal. Restaurant analyst Mark Kalinowski estimates that the fast-food chain’s profit margin for this combo will be between 1% and 5%, equating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski highlighted that the meal deal aims to attract inflation-weary customers back to the restaurant, with hopes that once inside, patrons will opt for additional items beyond the $5 offering.
However, the potential profitability of this deal is influenced by several factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is more about promotion than profitability.
While the deal may draw customers back to the restaurant, it does not guarantee profits for franchisees, who make up about 95% of McDonald’s locations. Franchise owners set their own prices and bear various expenses such as rent, insurance, permits, and taxes.
In May, McDonald’s U.S. president Joe Erlinger indicated that franchisees often use promotional offers like the $5 meal deal to offset their overhead costs. Nevertheless, Spiegel described the deal as a “loss leader” intended to attract and retain customers. She emphasized that when expenses for labor, packaging, condiments, delivery, and marketing are considered, franchise owners often find it difficult to maintain profitability on any of the items included in the deal.