McDonald’s is anticipated to generate a profit from its $5 meal deal, although the margin is expected to be modest. According to restaurant analyst Mark Kalinowski, the profit margin for this combo may range from 1% to 5%, equating to approximately $0.05 to $0.25 for each meal sold.
Kalinowski suggests that this deal is part of McDonald’s strategy to attract cost-conscious consumers who are feeling the effects of inflation, with the hope that once customers are inside the restaurant, they will make additional purchases beyond the $5 offering.
However, achieving profitability is contingent on several factors, including the cost of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, describes the $5 meal deal as “more promotional than profitable.” She points out that while the deal might drive traffic to the restaurant, franchise owners may not necessarily see those profits due to the nature of franchise ownership.
Approximately 95% of McDonald’s locations are franchise-operated, meaning that franchisees set their own prices and must manage various expenses such as rent, insurance, permits, and taxes. Joe Erlinger, the U.S. president of McDonald’s, indicated in May that franchisees often employ promotional offers like the $5 meal deal to offset overhead costs.
Nevertheless, Spiegel emphasizes that this combo serves primarily as a “loss leader” aimed at attracting and retaining customers. When additional expenses such as labor, packaging, condiments, delivery fees, and marketing are considered, franchise owners may find that the profit margins on the deal are significantly diminished or completely wiped out.