McDonald’s is expected to generate a small profit from its $5 meal deal, with projections indicating a profit margin between 1% and 5%, translating to approximately $0.05 to $0.25 per combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this deal is part of McDonald’s strategy to attract inflation-weary customers back to its locations, with the hope that once patrons are in the restaurant, they will purchase additional items beyond the $5 offering.
However, the potential for profit hinges on various factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
She noted that even if the bundle incentivizes customers to return, franchise owners may not see substantial profits. Approximately 95% of McDonald’s locations are franchise-owned, which means that these owners set their own pricing and are responsible for various costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., pointed out that franchisees often try to offset these overhead costs by offering promotions like the $5 meal deal. Nevertheless, Spiegel emphasized that the deal functions more as a “loss leader” aimed at attracting and retaining customers. When factoring in additional expenses related to labor, packaging, condiments, delivery, and marketing, she concluded that owners essentially eliminate any potential profits associated with the items in the meal deal.